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Nairaland Forum / Nairaland / General / Business / Why Can't Money Be Sufficiently Printed For Our Use? (11000 Views)
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Re: Why Can't Money Be Sufficiently Printed For Our Use? by adeibi: 4:17am On Jul 31, 2011 |
Great contributions from you all. I didn't know that printing money for projects & development will one way or the other eventually lead to inflation. Thanks for teaching me that but according to OYINBOGOJU, Japan and Qatar did that, have their economies been inflated by so doing? Will like to read more comments |
Re: Why Can't Money Be Sufficiently Printed For Our Use? by rhymz(m): 4:31am On Jul 31, 2011 |
Well, I want to disagree a little that printing money will always lead inevitably to inflation. I believe there are cases where governments have printed their way out of economic recession and its likes- the big US bailout comes to mind. I think the problem lies with the fact that we do not have the expertise, economic mechanisms & reach to checkmate any adverse effect occassioned by doing so. I have always asked too in thesame breath like the op, what if a country prints its own money and use it to buy goods and make debt payment outside of her country so that the brunt of inflation, currency devaluation etc will be borne by the other countries who have accepted to do business with the printing country. Afterall, how do you tell the difference that monies being used for transactions between countries are a deriative of wealth creation and not just printed money.nd not just printed money. |
Re: Why Can't Money Be Sufficiently Printed For Our Use? by dramenda(f): 4:36am On Jul 31, 2011 |
The y. |
Re: Why Can't Money Be Sufficiently Printed For Our Use? by Digriz(m): 5:12am On Jul 31, 2011 |
proO1:Those foreign companies wl never accept naira for their business transaction wt d government, u hv to pay them in dollars and printing a lot of naira wl mean lots of naira chasing a few dollar and the naira wld be worthless. |
Re: Why Can't Money Be Sufficiently Printed For Our Use? by 2bosun: 7:03am On Jul 31, 2011 |
adeibi: Japan and Qatar printed money and YES, it did lead to inflation but the difference was that their inflation was (-2% (deflation) in Japan), so they had to print money to up the inflation and keep their economy competitive. In the case of Qatar, they still have deflation (-4%), so they are still printing money to develop their economy as you can see with their recently won world cup bid. It is also important to note that the import-export ratio also plays an important factor in all this. Simply put, export more and you have more room to manoeuvre the QE (printing money), and vice versa. Nigeria imports basically everything! and exports basically one thing. Inflation is already 12%, unemployment, interest rates and all those indices are all pointing in the wrong direction. It would economic suicide to print N1000 notes and give to everyone. Capiche? |
Re: Why Can't Money Be Sufficiently Printed For Our Use? by marcus1234: 7:13am On Jul 31, 2011 |
Re: Why Can't Money Be Sufficiently Printed For Our Use? by 2bosun: 7:17am On Jul 31, 2011 |
rhymz: You are right and wrong. Printing money will almost always lead to inflation. It did in the U.S but they have other levers to pull to rein inflation e.g increasing taxes, cutting government spending etc. Printing any currency would devalue that currency not another country's currency. What planet are you on? It's like saying printing dollar would devalue the Naira. The printed money would still find its way back into the home country. |
Re: Why Can't Money Be Sufficiently Printed For Our Use? by OYINBOGOJU(m): 7:22am On Jul 31, 2011 |
Thank to all the great minds that have said something after all but rather than hit the nail on the head a lot of people are depending on 1 theorem by 1 Oyinbo to undermine our development. As for me, i speak based on fact and vivid examples 1, Nigeria have a vision 2015 but later changed to Vision 2020 how do we hope to achieve this? Possible answer We are waiting for Dangote to crash the price of cement before we can all have houses on our head. My thought I guess the Government owe us the responsibility to provide us accommodation, is that not part of vision 2020 How do we achieve vision 2020 when we are still waiting for Mr. Dangote before we could start laying the foundation of our dreamed home. In Japan I can confidently tell you that the government put up every great building like it is done in America,so that they can fulfilled their dream and not waiting for anybody. Yes vision 2020 but no jobs Sanusi is busy with Islamic Banking to landmark his great achievement Is that the only system that can eradicate poverty. In China Banks owe the people responsibility to finance every great idea. We do have this ideas in Nigeria but how has anyone fulfilled the idea, since the our banks are not corporative. They only borrow the rich more money, Imagine people like Bankole getting big loan worth 10Billion to finance the increase salary of their staff I am tired of talking about God barons Pastor living like Drug barons, all because the congregation are waiting for God to Print more money for us when it can be done over there in ABUJA. IN JAPAN The homeless have the right to walk into any eatery and get whatever they want to eat In what way has Government done anything in the interest of the Masses. Don`t give me money I don`t need free Education I don`t need free Electricity I don`t need free Water I don`t need free road BUT let the government print more money to Develop new road and not give it to babalakin and co. Let the Government print more money to equip our school from Nursery to University and let see if people won`t pay to go there Let the government provide more money to make stable power supple and lets see if people won`t pay their bills monthly Let the Government provide us with clean water and lets see if the Citizen will not stop dyeing of Cholera NB I heard only 2 or 3 teaching hospitals have MRI SCAN in Nigeria, Why cant government print more money to buy them and put them in all hospital when Ordinary clinic in Japan can boast of atleast ONE MRI SCAN. STOP GIVING FREE GIFTS OH DEAR RULERS PRINT MORE MONEY TO FULFILL YOUR RESPONSIBILITIES. YOU OWE THE CITIZENS GREAT THINGS OF LIFE AND IT CAN ONLY BE DONE BY PRINTING MORE MONEY AND USED IT JUDICIOUSLY MY QUESTION WHY DO WE WAIT ON GOD TO PROVIDE US WITH GREAT THINGS OF LIFE,WHEN OUR DEAR GOVERNMENT CAN PRINT MORE MONEY TO FULFILL OUR LONG LONG TIME DREAM. |
Re: Why Can't Money Be Sufficiently Printed For Our Use? by 2bosun: 7:34am On Jul 31, 2011 |
OYINBOGOJU: There is more than enough money as is to go round my brother. All the money ends up in the hands of Bank-ole and co. So even if they print the money, what are the chances that the common man would smell any development? I'd say the chances are slim- What you need to ramble about is that your government should have some fear of God and release some of that money they stash abroad. Printing more money would be a lazy solution to a much more complex problem. |
Re: Why Can't Money Be Sufficiently Printed For Our Use? by member479760: 7:37am On Jul 31, 2011 |
naira na paper, internationally u cant use it to settle anything. if Sanusi starts the chicken business and Fashola rice business then we have chicken and rice, we can exchange it for hard money, then in-turn use the hard money to buy tractors, use it to repair the bad roads etc. |
Re: Why Can't Money Be Sufficiently Printed For Our Use? by rhymz(m): 7:42am On Jul 31, 2011 |
I would be grateful if any one had any thoughts on the following question. I understant that if a government were to print more money and circulate it into its own economy, that this would inevitably lead to increased inflation in its country. Sound argument for not printing more money. But why would a country not print more money to purchase from other countries (e.g. to repay debt or to purchase raw materials). Wouldn’t the extra money then simply be dumped into the other country, leading to higher inflation in that country and not your own? Or perhaps is the answer that in dumping the extra money overseas, you are indirectly creating more money in your own territory? Maybe a naive question but I would love to have a good answer to it! |
Re: Why Can't Money Be Sufficiently Printed For Our Use? by 2bosun: 7:50am On Jul 31, 2011 |
rhymz: You've answered the question, as international a currency as the dollar is- if it's printed to pay debts in other countries etc. It will still find it's way back into the home country. You can't "dump" money abroad, dollars are useless in China etc., so they just return the money for goods/services in America where it's a legal tender. Inflation is only when you have your own currency chasing your own goods and services, another man's currency can't pay for your goods in your country. Let's not even go near the Naira because the Naira is barely recognizable beyond the boundaries of Nigeria- so you can't use it to pay for anything beyond Nigeria. I hope it helps, maybe a real economist could help me out here? |
Re: Why Can't Money Be Sufficiently Printed For Our Use? by OYINBOGOJU(m): 7:53am On Jul 31, 2011 |
2bosun: That is on the part of the rulers to decide. Didn`t they print more money to develop ABUJA? or was it given to Private sector to develop Why can`t they develop other cities like that, or it is an offense? It is government responsibility to print and make sure it is used to its specific purpose. Let us stop putting our development at the hand of private sector. Hong Kong government built one of the best airport in the world, But here in NIgeria, the small local airport that was built by Babalakin and co. charges exorbitant fees for nothing. That is RIP OFF Government owe us the great deals of life, like infrastructure |
Re: Why Can't Money Be Sufficiently Printed For Our Use? by OYINBOGOJU(m): 7:59am On Jul 31, 2011 |
2bosun: Was it not the same Naira that was used to develop Abuja? Was it not the same naira that was used to develop Lagos when the capital was moved here? Was it not not REMEBI China currency that is used to develop China Was it not same Yen in Japan that is used to develop Japan Print more Naira, Get local contractors and Pay them In the same Naira and lets see of the work will not be done. Moreover China have their reserved in USD worth 1.5trillion usd why are they not depending on it like we clamor for it here? MY ADVISE USE WHAT YOU HAVE TO GET WHAT YOU WANT |
Re: Why Can't Money Be Sufficiently Printed For Our Use? by rhymz(m): 8:04am On Jul 31, 2011 |
This explanation completely ignores the fact that when the government “borrows” money from the Central Bank that’s exactly what it does. It creates the money out of thin air and gives it to the government to spend in exchange for Government debt (i.e. IOU’s). Not only that, but through the process of fractional reserve banking private banks use the Central Bank’s “new money” as the basis for increasing the money supply by an additional 1,000% (10X) through private lending. Adding insult to injury, not only does the current system multiply the inflationary impact of government deficit spending (10X as much as if the government had simply been honest and printed the money itself), but it also requires the government to levy additional taxes on our children to “repay” the principal and interest on the original “loan”. The fact is, if the government cut out the middleman and used seignorage (i.e. the government’s power to levy an indirect tax on its citizens by simply printing more money) we would all be much better off (at the expense of the bankers). |
Re: Why Can't Money Be Sufficiently Printed For Our Use? by OYINBOGOJU(m): 8:15am On Jul 31, 2011 |
rhymz: Can you please tell me why the government didn`t calculate the inflation extent when they printed more money to develop Abuja? Or they didn`t realise all those calculations you put up there at that time. |
Re: Why Can't Money Be Sufficiently Printed For Our Use? by OYINBOGOJU(m): 8:19am On Jul 31, 2011 |
Japanese government is coughing out 40billion usd to develop areas spoilt by Tsunami. Didn`t they realize all those inflation and calculation you put there or its only we Nigerians knows those theorem? |
Re: Why Can't Money Be Sufficiently Printed For Our Use? by deenee: 8:25am On Jul 31, 2011 |
When money is printed without any real economic activity attached to it (real production that will create sustainable jobs and add to the growth of the economy), it becomes greatly devalued. For the poster,the main issue should be how, the Govt of the day can ensure that the 20k earned has real value?
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Re: Why Can't Money Be Sufficiently Printed For Our Use? by Nobody: 8:28am On Jul 31, 2011 |
Digriz: Thanks a lot. I believe this explains it. From all indications, the same principle holds true no matter how one looks at it: too much money chasing too few items would ALWAYS result in a devaluation of the money and cause inflation. . .even if the item being chased is a foreign currency like the dollar. It therefore seems that the only solution is for countries to be productive. Any wonder, then, that industrialization is almost always synonymous with wealth? The most industrialized countries are almost always the richest - in terms of GDP at least (I think Adam Smith discusses this in his classic work, The Wealth of Nations). And in the context of the great explanations you guys have made here, it is all very clear now. Unfortunately, any hope of industrialization for Nigeria seems far-fetched. And considering the size of our population, there is little hope that an over-reliance on oil revenues would have the same kind of positive effects it has on tiny sheikhdoms like Qatar, Kuwait, Brunei etc. Even if governments in Nigeria suddenly stop being corrupt and decide to put the oil money to good use, it would still take a while to bring about the industrialization that would increase productive capacity and create real wealth. However, since our governments have no immediate plans to eschew corruption, and since there are no viable short-cuts (e.g. Printing more cash), I guess national wealth would remain a mirage for Nigeria. Trouble. |
Re: Why Can't Money Be Sufficiently Printed For Our Use? by unphilaz(m): 8:32am On Jul 31, 2011 |
nice discuss. the thread is divided into dont print more money which will lead 2 inflation VS print more money 4 development and use the benefit to reduce inflation. i think the latter should be considered. |
Re: Why Can't Money Be Sufficiently Printed For Our Use? by Sike(m): 9:22am On Jul 31, 2011 |
OYINBOGOJU: |
Re: Why Can't Money Be Sufficiently Printed For Our Use? by kulutempa: 10:06am On Jul 31, 2011 |
proO1: Absolutely correct. I have always believed that one of the worst things that happened to Nigeria was the oil boom. It made us lazy and unproductive and turned us into net importers and consumers of foreign goods, and foodstuffs which we used to produce. One of the the key factors behind developed economies with strong currencies is a concept known as "value added". They take a basic commodity like iron ore and process it into steel which they then sell and export at a much higher price. That is also the major problem with the Nigerian economy: we add very little economic value and depend on a basic volatile commodity which we export in return for higher priced valued added imports. As such we fritter away our valuable foreign reserves and borrow to make up for budget deficits in the hope that we would somehow find the money to make up the difference in the future. At current oil benchmark prices, Nigeria earns at least $125 million every day from crude oil sales but we are still in a mess because most of the money is either stolen by predatory and corrupt leaders or spent on recurrent expenditure like public sector wages and petroleum subsidies, instead of capital projects like power generation and road and rail infrastructure which could improve our productive capacity and lower our manufacturing costs. In the meantime our population is growing every year and there are not enough jobs being created in our economy. Since printing money is a non starter, can anybody guess where we are likely to end up if we continue on the same path? |
Re: Why Can't Money Be Sufficiently Printed For Our Use? by ayinba1(f): 10:11am On Jul 31, 2011 |
Very great discussion. Print money? Very bazaar idea because you and I know whose pockets it will fill up Use the money that is already available? Now we are talking! Don't keep waiting for God, He has equipped you. Hold your leaders accountable! |
Re: Why Can't Money Be Sufficiently Printed For Our Use? by Claus(m): 12:00pm On Jul 31, 2011 |
Economics should be compulsory up to SSCE level. Great to see some of the explanations on here. Although I'm alarmed at the understanding of Economics here, I'm glad people are bold enough to ask questions and humble enough to listen to the answers. As someone showed before, any extra money printed will find its way into the economy. Inflation occurs when too much money chases too few goods. A simple economy that has just 10 cows and money supply of N100, would have the cost of each cow at about N10. Increase the money supply to N1,000 without having produced any more cows and you get the price of cow shooting up to N100 each. Hence the inflation. The exact mechanics of how this price increase works in a complex economy can be complicated. With regards to printing more money to pay off foreign debt. Even if the foreign creditors will accept Naira, the value of Naira is based on the demand and supply of other currencies relative to the Naira. For example if Nigeria increase its money supply, more people have Naira and they will use some of this Naira to try to buy pounds. The demand for pounds relative to Naira increases. This increases the value of pounds and reduces the value of the Naira. We then need more and more Naira to buy the same amount of pounds, thereby defeating the whole purpose. In a global economy where information travels fast, a huge demand for pounds from Naira holders can change the exchange rate within hours. Hope that has helped. |
Re: Why Can't Money Be Sufficiently Printed For Our Use? by kulutempa: 12:32pm On Jul 31, 2011 |
Claus: @Claus, that was indeed helpful. At the end of the day, money is nothing but a store of value. The only reason why it was invented was for convenience, and not to replace whatever goods and services people were producing and exchanging with each other beforehand, by way of barter. That is why people sooner or later lose confidence in a currency that is being printed by a government without anything to back it except the printing machine. At the end of the day, any unit of currency is only as good and strong as the real wealth being created in the country with that currency, and real wealth is created by the productive effort of using ones brains and hands, not by printing money or relying on a depleting natural resource like crude oil, the price for which can crash within a short period of time. This was in fact the main reason why the Nigerian economy collapsed in the 1980s and 1990s and the value of the naira plummeted relative to other currencies like the pound sterling and the US dollar. |
Re: Why Can't Money Be Sufficiently Printed For Our Use? by adeibi: 1:28pm On Jul 31, 2011 |
Claus: Oh dear! Thanks a lot You've indeed helped. I now understand better. |
Re: Why Can't Money Be Sufficiently Printed For Our Use? by adeibi: 1:36pm On Jul 31, 2011 |
kulutempa:You have just summarised it all. Thanks. |
Re: Why Can't Money Be Sufficiently Printed For Our Use? by adeibi: 1:42pm On Jul 31, 2011 |
dramenda:AMEN!!! God bless u too |
Re: Why Can't Money Be Sufficiently Printed For Our Use? by manny4life(m): 2:00pm On Jul 31, 2011 |
In addition to @kulutempa , FOREX is the most liquid of all securities traded in the world therefore demand fluctuates in seconds and minutes, and price stability of the Naira as well as the interest rate on the Naira is very important to the Naira. unphilaz: I'm all for printing money ONLY if there should be need and since the need to build infrastructure is important, I say print money. However, such printing decisions should met several other criteria. Several factors that should be taken into consideration should include, 1. Unemployment Rate 2. Bank lending Interest Rate 3. Current inflation and Price control 4. Costs and Benefits valuation Like my previous examples, if Nigeria has $100billion in money supply (all components taken in account), with a current inflation rate @ 12%, adding another 5% to the money supply which is $5billion bring a total of $105 billion circulation and same amount will drive inflation to 17%, for its purpose, I think it's worth it. If $5billion is divided in to two; job creation through establishment of small loans for small and mid size business and the other used for infrastructure, that will definitely go a long way. rhymz: 2bosun: To add what he said, you cannot dump your currency on another country. This is where balance of trade comes in; if you print excess money to pay debts, that excess money is within your own country. For instance you would think to print $1billion to pay down your debt but your debtors will take factors of your inflation to calculate it and in essence you will think your $1billion is worth $1billion (I did the calculation some where in my previous post) but in deed its worth $10million, so your idea will be to continue printing to you repay $1billion, the more you print you add inflation, the next time you print $1billion, instead of its worth being $10million, it will worth $1million. As you can see, continuous printing isn't helping you repay debts but cause more debts and add inflation to the economy |
Re: Why Can't Money Be Sufficiently Printed For Our Use? by adeibi: 2:05pm On Jul 31, 2011 |
proO1: My heart bleeds for Nigeria. There seems to be no hope and that's very worrisome. 9 years to the year 2020 and we've not achieved any of the visions. Things are easier said than done I guess. We're very good in visionising but very poor in making it a reality. The number 1 and most important step to starting/achieving industrialisation is having a constant power supply. That should be numero uno on Bros GEJ'S list. If that's the ONLY thing he can achieve then he has achieved everything. He should pursue it squarely and stop jumping from one project to another thus leaving them half way. He should completely solve the POWER problem, if he has more years to embark on another project, fine, but if he doesn't, the next administration will choose another and solve completely too and so on. That's the only way I see the change we want coming to reality IMO. I love my country and I hope my dreams for this country come to pass |
Re: Why Can't Money Be Sufficiently Printed For Our Use? by 2bosun: 3:45pm On Jul 31, 2011 |
adeibi: It's easier said than done my sister, trust me in this Nigeria, some people would rather die than there be constant power supply. That's the root of the problem that needs to be dealt with. It's almost impossible because you would have to change people's thinking pattern- I weep for this country whenever issues like these are brought up. It's not just the leaders- everyone has to be on the same page for Nigeria to move forward. |
Re: Why Can't Money Be Sufficiently Printed For Our Use? by grammy: 3:46pm On Jul 31, 2011 |
Great thread!!! best i have seen in a long time, you guys are wonderful. We need more contribution here, and please can we focus on what the solution to Nigeria probem can be, any idea will be greatly welcome at least by me |
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