In this work we will address the problem of printing too much money. To the layman, this hardly seems to pose a problem. But the truth is, having too much money is just as big a problem as not having enough. Economists have been studying this phenomenon for some time now and have discovered that the issue is more complex than it appears at first glance. There have been cases where countries resorted to printing money to save their economies, but the results were not even close to what was expected. There's a lot more to this than just examples, but by analyzing these specific scenarios we can shed some light on the general concept. We will also try to achieve this goal through the use of information on this topic and raw data. Hopefully, after reading this article, you will have the knowledge to understand and think critically about this issue. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”? Get the original essay Before money, the method by which people exchanged goods and services with each other was called barter. This consisted of exchanging one good for another good. It was a simple system but had many limitations that prevented it from remaining the system of choice for commerce. This is where silver came in. Thought to have first been used in China during the Song Dynasty, silver hoped to provide a convenience that barter could not. The advantage of money is that it can serve as a means of exchange, a store of value and a unit of account. Money can take many forms, but the most common currency that we all know is called fiat currency. Fiat money is an object that has no value in itself, but obtains its value, usually through the government. However, for money to be used, it must be manufactured in some way. This process is, however, a little more complicated than simply printing a piece of paper with a number on it, as we will soon see. Now that we know the basics of money, let's look at things in a little more detail. There are two ways to make money. These are legal tender (money in the narrow sense or base currency) and bank money (currency in the broad sense). Legal tender includes all coins and banknotes that circulate in the country. This is the currency that has been standardized by the government, hence its name “legal tender”. This is called M0 (varies by country). This type of money only represents 3% of the total amount of money. Bank money (also known as demand deposits or M1/M2), on the other hand, accounts for the remaining 97% of the total amount of money in the country. . However, this is not physical money that you can touch and hold, but electronic money created through loans from second-tier banks. In order to control the amount of money created by banks, a country's central bank uses different monetary policies. Now that we have a more detailed understanding of money creation, we are one step closer to understanding the risks associated with printing as well. a lot of money. The next phenomenon we need to understand is called inflation. Inflation can be defined as an increase in the price of goods and services over a period of time. As for rising prices, purchasing power decreases, and therefore the value of currency decreases. In order to measure the inflation of a country, the inflation rate is used. Inflation can bring benefits as well as harm the economy. Some advantagesof inflation are a decrease in savings and investments, scarcity of goods, etc. However, it can also have positive effects like positive interest rates, lower unemployment, etc. With inflation out of the way, we're ready to get down to business. the question: why printing too much money is harmful to the economy. Money is used to purchase products; in other words, it is equivalent to their value. This does not mean, however, that increasing the amount of money will result in an increase in the number of products. Money will be abundant while the number of goods will remain the same. In theory, we have a lot of money and can therefore afford to buy almost anything. This defeats the purpose of money, which is a “luxury” that you can exchange. To return to “equilibrium,” prices will also have to rise, causing inflation. So not only has the situation not improved, it has gotten worse. The quantity of money increased, the number of goods did not increase, prices increased, and the value of money decreased. This last consequence is the most “fatal” for the economy because it is very difficult to go back. The worst part is that it is a cycle that perpetuates itself; once started, it is very difficult to stop and restore the previous value of the currency. The relationship between money supply and price level can be demonstrated using this formula: MV = PY where M = money supply, V = velocity of money, P = Price level, Y = National income. If we take V and Y to be constant, then an increase in M ​​will cause an increase in P. Before World War I, the German mark had a 4.2-to-one exchange rate with the U.S. dollar. In 1923 the rate was 4.2 trillion to one. During World War I, the German government decided to print money in order to invest in the military. They planned to repay the debts by demanding payment from the defeated Allies. But things didn't go as planned when Germany lost the war and found itself with even more debt under the Treaty of Versailles. Inflation rose slowly at first, then in 1922 it rose from just 2,000 marks to over a million in no time. period of a few months. Germans lived in miserable conditions, while the government continually printed worthless money. In order to collect their payments, workers had to use bags, suitcases and even wheelbarrows to transport the money. Some people have even decided to use barter as a method of exchange. Hyperinflation finally ended in 1923 when the government adopted the new currency, the rentenmark. They decided to maintain the old exchange rate of 4.2 rentenmarks per US dollar. Although the German people recovered from hyperinflation, its blow was lasting and supported radicalism in the years to come. I always wondered why we didn't just print more money. In this way, people could afford more goods and services and would therefore be happier. But as I learned more about the subject, I realized the underlying problems with printing more money. If the government decided to print money, for whatever reason, it would only affect the money supply. With the newly acquired money, people would like to buy whatever they can get their hands on. This would push the market to produce more goods and services. Most of the time, this is not feasible, so businesses and producers will be left with the only option: raise prices. Everything from materials..