Printing money by government?

Question

can someone explain why the government will not print as much money as they want?? what are the checks and balances in place??

please explain or point me to a link/source where i can study on my own, how the money supply flows through our system?

i am trying to fathom the money printing by Central banks, or they really eroding the value of our savings while trying to keep economy/stock market /credit market from going down??

Answer 1

money printing hmmmm, when we have lots of money we could buy evverything we want.



suppose the government wants to give money and prints lots of 'em, everyone, literally everyone have tons of money, everyone wants to buy everything.



so what's gonna happen? if there is too much money, the seller of the goods knowing he cant sell goods to everyone will try to make sure he gets the highest price for its products.



and since people would wanna buy it and they have lots of money they will be willing to pay for it at a very high, ridiculous price even.



so what does lots of printed money create? it increases the prices of goods, it devaluates the money.



When you can buy a 10 karat diamond now with 2million dollars, the ten karat diamond will not just cost 2million dollars when everyone already has 2million dollars in their pockets.



the central bank's basic indicator for all these control is still the Law of demand and supply, if consumers have high demand, the supply dwindles. If there is too much supply, then demand will not be so high anymore since the supply almost services every demand that comes up.



the eroding value of your savings:



a lot of factors come in play when a currency loses its value (devaluation), notice that when a currency looses its value interest rates for savings and loans go up.



reason behind:



a currency looses its value when there is too much currency out in the market (lots of people want to spend money instead of keeping it and putting it in the bank)- read too much supply of money is out, so what happens the currency is devalued, prices go up



governement controls it by raising interest rates to a level that encourage people to save their money and putting it in banks thus lowering the money supply in play, for the currency's value to rise.



it also raises interest in loans so people would be discouraged to take out loans and spend the money.

Answer 2

First of all, most of the money in circulation is not "printed" by the government, it is created by you and me when we write a check, make a credit card purchase, take out a mortgage, etc. Most of the money in circulation is actually not hard cash, but nothing more than electrons traveling from one computer to another. If the government allowed the creation of money to get out of hand, it would cause inflation. That is why the Federal Reserve raises interest rates to combat inflation. Higher interest rates cause us to spend less, borrow less, etc., thus creating less money. When the government wants to inject more money (or liquidity) into the system, it doesn't simply turn on a printing press -- it goes into the credit markets and buys treasury notes and bills, which has the effect of lowering interest rates and putting more cash into the system. If it wants to turn off the cash spigot, it doesn't "stop the printing press," it simply sells treasury notes and bills, taking on more debt and sucking cash out of the system.

Answer 3

The dollar would become worthless is the govt. printed as much money as they wanted.



It's not the printing of money that you're interested in, it's the role the Federal Reserve plays in lending money. The Fed has two goals, low inflation and moderation economic growth as measured by the GDP.



Read more about the role of the Fed is you're interested in this.

Answer 4

if everyone in the UK decides to withdraw their cash did you know that everyone will not get their cash as there isn't enough in circulation?



if there is too much money in the economy then inflation goes through the roof. this devalues your savings etc as you will have to spend more money to buy normal items.



The chancellor (budgeting) & bank of england (interest rates) are the checks inplace to sort this out.



your best bet is to look at economics websites/literature.

Answer 5

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