I am an agricultural economist(not practicing) and i do teach economics in a secondary school and i was asked this question by one of my student,he said:"master why can't the government print more money and pay all the debt they are owing",i tried to explain but i wasn't convinced myself with my explanation.So the economist in the house please help me proffer sound theoretical and practical approach to the question above.Moderator please help me move this topic to the front page so as to gather more explanation.Thanks.

I'm no economist but I must say tis like this student of urs read my mind when I was young. As a kid I used to ask similar question, only dat mine was dat y don't d central bank print out more money nd distribute to d pple so no one remains poor?
Anywayz, dats exactly what d argentina govt did. Printed out more money to pay back its debts.
But d thing is d more money u print, the more ur currency loses it value which will in turn affecvt ur economy.
Now I give d mike to d next poster dat came explaion it in economics terms

*spreads mat chilin wit origin mixed wit kunu nd bread cookd wit ric* oya turn up! Nxt!

qbd2:
I'm no economist but I must say tis like this student of urs read my mind when I was young. As a kid I used to ask similar question, only dat mine was dat y don't d central bank print out more money nd distribute to d pple so no one remains poor?
Anywayz, dats exactly what d argentina govt did. Printed out more money to pay back its debts.
But d thing is d more money u print, the more ur currency loses it value which will in turn affecvt ur economy.
Now I give d mike to d next poster dat came explaion it in economics terms

Thanks for your answer even though you didn't explain it in economics terms,but if truly argentina paid their debt by printing more money,the money shouldn't have lost its value since it was paid to other countries,don't you agree?

Hmm, let me first think and research about it first and come back to comment

Gracebegatme:
Thanks for your answer even though you didn't explain it in economics terms,but if truly argentina paid their debt by printing more money,the money shouldn't have lost its value since it was paid to other countries,don't you agree?

qbd2:
Hmm, let me first think and research about it first and come back to comment

i will be waiting for your findings.

the cost of printing the money is higher than the money printed.

I Also have dis mentality too. .

Gracebegatme:
I am an agricultural economist(not practicing) and i do teach economics in a secondary school and i was asked this question by one of my student,he said:"master why can't the government print more money and pay all the debt they are owing",i tried to explain but i wasn't convinced myself with my explanation.So the economist in the house please help me proffer sound theoretical and practical approach to the question above.Moderator please help me move this topic to the front page so as to gather more explanation.Thanks.

When government print more money the value of money drop. You loss purchasing power and risk hyperinflation.

More money start chasing less goods in the economy. Consumer have more to spend thereby leading to increase in price of goods and services. If a cup of garri cost 10 naira before government print more money, the same cup of garri will cost double after government print more money.

Printing more money to pay debt will complicate and worse the situation than solve it.

Let me use a personal example:

Assume Mr. A is married with 3 kids, lived in Lekki, have a Range Rover Sport and 2 girlfriends. He achieved all this via debt and doesn't have any income or generate any income. If an uncle give him, #500,000. He will spend that money to service the debt and also get into more debts because he doesn't have any income aside the awoof money coming in.


Hope you understand and can relate that to government printing more money.

1. The naira would be devalued the more.
2. There is going to be inflation.

If the government prints more money, there will be a lot of money in circulation and thus it's value will diminish this is simply because scarcity of whatever good including money will increase the value of such good and vice versa.
Now when a lot of cash flows in the economy, the prices of goods and services will go up (ceteris paribus)

Then it will lead to Inflation...
The mone loses its value,, excess cash will be used to purchase fewer goods n services..
In the long run,, ur cash wunt be useful again.. N i guess pple will rather trade by bater than accept cash as means of exchange...!

iMerchant:

When government print more money the value of money drop. You loss purchasing power and risk hyperinflation.
More money start chasing less goods in the economy. Consumer have more to spend thereby leading to increase in price of goods and services.
Printing more money to pay debt will complicate and worse the situation than solve it.
Let me use a personal example:
Assume Mr. A is married with 3 kids, lived in Lekki, have a Range Rover Sport and 2 girlfriends. He achieved all this via debt and doesn't have any income or generate any income. If an uncle give him, #500,000. He will spend that money to service the debt and also get into more debts because he doesn't have any income aside the awoof money coming in.

Ok,i got the latter part of your explanation,but can you shed more light on how printing money can reduce the purchasing power of a consumer because the apriori expectation is that purchasing power increases as velocity of money increases.Thanks

More explanation is needed

Gracebegatme:
Ok,i got the latter part of your explanation,but can you shed more light on how printing money can reduce the purchasing power of a consumer because the apriori expectation is that purchasing power increases as velocity of money increases.Thanks

Velocity of money is about how fast money exchange hand in business. When you give value or solve problems money moves in.

When people dash you money, you can't call that velocity of money. You didn't do anything to deserve it, they give you out of there free will.

How more money reduce your purchasing power:

Let assume that the total money in the circulation is 100,000 naira. Let also assume that a Toyota Corolla cost #500. If the government printing more money, let assume govt. print additional #100,000. The total money in circulation have increased to 200,000. That means if you have #500 after the new money, you can't afford Toyota corolla again. after the new money, Toyota corolla will cost btw 1k-1.5k.

The new money have dilute the value of your earning or salary. If the government doesn't withdrawn the new money from circulation, you keep losing your purchasing power until government does.

iMerchant:


Velocity of money is about how fast money exchange hand in business. When you give value or solve problems money moves in.

When people dash you money, you can't call that velocity of money. You didn't do anything to deserve it, they give you out of there free will.

How more money reduce your purchasing power:

Let assume that the total money in the circulation is 100,000 naira. Let also assume that a Toyota Corolla cost #500. If the government printing more money, let assume govt. print additional #100,000. The total money in circulation have increased to 200,000. That means if you have #500 after the new money, you can't afford Toyota corolla again. after the new money, Toyota corolla will cost btw 1k-1.5k.

The new money have dilute the value of your earning or salary. If the government doesn't withdrawn the new money from circulation, you keep losing your purchasing power until government does.

understood.You have just explained inflation.

Gracebegatme:
understood.You have just explained inflation.

You have an idea but printing more money without control leads to hyperinflation which is worse than inflation.

The country's currency loss value beyond repair.

Countries can't print their way out of debt just like an individual can't borrow his/her out of debt.

Gracebegatme:
I am an agricultural economist(not practicing) and i do teach economics in a secondary school and i was asked this question by one of my student,he said:"master why can't the government print more money and pay all the debt they are owing",i tried to explain but i wasn't convinced myself with my explanation.So the economist in the house please help me proffer sound theoretical and practical approach to the question above.Moderator please help me move this topic to the front page so as to gather more explanation.Thanks.

This OP sef.

Haven't you heard of a country called Zimbabwe.

puskin:

This OP sef.

Haven't you heard of a country called Zimbabwe.

If i have heard of what happened to them,may be i wouldn't have asked this question.Since you are here i will be glad if you can share it with me.

Gracebegatme:
If i have heard of what happened to them,may be i wouldn't have asked this question.Since you are here i will be glad if you can share it with me.

They experience the worst hyperinflation in the history of mankind. The first country to experience hyperinflation was Germany after World War 2.

When a country experience hyperinflation, the currency become useless. Imagine having to carry #100 billion to buy a bread that cost #10 naira.

That was happen in both countries. A newspaper become valuable than the country's currency. People start using money to cook instead of wood, gas or kerosene. Its way cheaper to burn the currency that to buy wood, gas or kerosene to cook.

Businesses start rejecting the currency. Price of goods increase per second and value of money drop every second.


It is worst than debt.

iMerchant:


They experience the worst hyperinflation in the history of mankind. The first country to experience hyperinflation was Germany after World War 2.

When a country experience hyperinflation, the currency become useless. Imagine having to carry #100 billion to buy a bread that cost #10 naira.

That was happen in both countries. A newspaper become valuable than the country's currency. People start using money to cook instead of wood, gas or kerosene. Its way cheaper to burn the currency that to buy wood, gas or kerosene to cook.

Businesses start rejecting the currency. Price of goods increase per second and value of money drop every second.


It is worst than debt.

I want to believe the part you said money was used to cook instead of kerosene and wood was an hyperbole.

Gracebegatme:
I want to believe the part you said money was used to cook instead of kerosene and wood was an hyperbole.

I wish I was joking but sir, I was not joking.

It happened for real.

What happens when government print more money

You can't print yourself out of debt.

*The value of Ñäira will fall
*inflation/hyperinflation

LALASTICLALA

inflation! inflation!! inflation!!! inflation! inflation!! inflation!!! inflation! inflation!! inflation!!!

you need to understand the concept of inflation. if more money is being. printed the value of your savings will worth less.

The economy would become over bloated.

ultrazone:
The economy would become over bloated.

How sire?

The answer is simple. It cost more to print money. One naira can be printed with about #1.60k (contract tins included).
That's the sole reason, before even inflation sets in

Gracebegatme:
Thanks for your answer even though you didn't explain it in economics terms,but if truly argentina paid their debt by printing more money,the money shouldn't have lost its value since it was paid to other countries,don't you agree?

You are getting something wrong here o. The printed local currency was first of all converted into foreign exchange; it was the foreign exchange that was paid to service the foreign debt while the printed local currency remains within the country, to flood the market thereby making the currency to lose its value.