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Can poor countries print more money to be richer?

Curious Kids (curious kids) is a Q&A series for kids of all ages on The Conversation. Children will ask questions on The Conversation, and this site will ask experts to answer those questions.

I surfed this site and I found a really interesting question from 12 year old Clementine from London: "Why don't poor countries print more money to become richer? ”, Please quote the answer for your reference.

Printing more money can cause anything?

When a country wants to print more money thinking it will make the country richer, this rarely works. Because if people have more money, commodity prices will also increase. And we will have to spend more and more money to buy the same amount of goods.

This happened to Zimbabwe in Africa and Venezuela in South America, both of which printed more money to try to make the economy grow.

When money-accelerating printers work, prices rise faster, until these countries experience something called "super inflation”, That is when the price increases by a terrible amount in a year.

When Zimbabwe suffered from hyperinflation, in 2008, prices rose to 231,000,000% in one year. Imagine a piece of candy costing a Zimbabwean dollar before inflation would cost 231 million Zimbabwean dollars a year later. This time the amount of printed paper may be more valuable than the amount written on it.

Maybe print more money to be richer, BUT…

To be richer, a country must produce and sell more things, both goods and services. It would be safer to print more money now, because people can use that money to buy more goods. If a country only prints more money without increasing production, then the price will increase.

For example, a special Star Wars toy set was produced in 1970, and no one is producing this model now. So even more money doesn't mean more people will buy it. Sellers will continue to raise prices.

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Currently, the only country that can get richer by printing more money is the United States (although they are already wealthy now). That's because the most valuable things that countries around the world buy and sell together, including gold and oil, are all priced in US dollars. So if the US wants to buy more, they can actually print more money. However, if you print too much, the goods in dollars will still increase.

Of course, poor countries that want to print more money, can only print their own currency, not print US dollars. And if they print too much, the price will increase very fast and people will not use that currency anymore. Instead, people will exchange goods with each other, or ask to be paid in US dollars instead of the national currency. That's what happened in Zimbabwe and Venezuela and many other countries with hyperinflation.

Venezuela has tried to protect people from hyperinflation by passing price-keeping laws on essential goods like food and medicine. However, because of no increase in prices, these items were bought out of stores.

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But not a nation never richer if printing more money. They can still be richer, if that country doesn't have enough money. Without enough money, businesses cannot sell or pay employees. People can't borrow money from banks, because banks don't have enough money either. In this case, printing more money helps people pay more, companies produce more, have more to buy and people also have more money to buy them.

Economics, gloomy science

In 2008, when the global economic crisis took place, banks lost a lot of money and couldn't pay customers. Fortunately, most countries have central banks to manage other banks, and they have printed more money to help the economy work again.

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Too little money makes the price fall, which is not good. But printing too much money without an increase in production causes prices to rise, which is equally bad. So it's no surprise that economics, the subject of money, commerce and business, is often called the "gloomy science".

What do you think about this issue? Join in the discussion for fun : D

no-reply@tinhte.vn (vn_ninja)

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