Can Poverty be Abolished by Printing More Money?

“Excessive printing of money will simply lead to such a hike in prices that even tons of currency notes would be insufficient to buy things of basic subsistence. ”

Many people have a fantasy that such a lot of money should be printed in this world that it puts an end to all their financial troubles. They usually think that governments can do this with ease but don’t do it on purpose.

Such thoughts though pleasant can only be termed as childish because it’s not the government but the market forces that actually control money. Excessive printing of money will simply lead to such a hike in prices that even tons of currency notes would be insufficient to buy things of basic subsistence.

Let’s take an example. Suppose you and everybody else get a huge amount of money from the government as a gift. What would you do? Either you would pay off your old debt or you would deposit some amount of money as your savings. But the most important of all, you would go into the market and buy the your favorite things.

Let’s say you want to buy a car. Now, a problem arises that an extremely large number of people also want to buy cars (because of the gifted money) but the number of cars is very limited. What should the manufacturers of cars do? Should they keep the price of cars same as before or should they increase it manifold?

If the price of cars is kept the same the company would not have enough cars to be sold to everyone. They would simply run out of product. This would indeed be a very precarious situation for the car manufacturers.

So, they decide to increase the car prices by a huge amount. It would mean that your gifted money is of no use, as the car (and similarly other countless products) would again go beyond your reach. Inflation would become so high that you would again find yourself among the poor.

Let’s say that the car manufacturers decide not to increase the prices. Then, they would have to increase the production enormously in a very short span of time. This is not feasible unless some miracle takes place and cars start pouring from the sky.

So, we can say that even by printing more money the number of people and the number (supply) of products in the world would remain the same and would not contribute even a jot towards the alleviation of poverty.

Author - DeeKay

Tags - Finance, Economy

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