Essay Written For: Danet Espinosa
College: Miami Dade College
Name of the Instructor
When The Government Prints Money
Responsible governments around the world, in spite of having the right to print money, just do not do it. If it did print and handed out twice as much money as it was in the economy, that would not make life easier at all. The Tapese would not end-up affording an extra bag of corn each (Seitz 32). Instead, prices would just rise, and the residents would be in exactly the same place as they are at the moment. Cassidy (111) argues that this has been observed over and over again when the government decreed increase in wages.
The Consequences of Having More Money in Circulation
Before the invention of money, individuals exchanged their produce with the things they could not produce. This is called barter trade. It is inefficient since one has to keep on looking for a person who really wants the items they possess while at the same time having what is needed by themselves (Brown 34). In essence, there was the ‘double incidence of wants’ challenge. Another challenge is that without money, one might find it hard to save up what they produced. There would be what Seitz (32) refers to as the ‘retention of value’ problem. This is why money is important.
When people get more money into their pockets, there are those who might save and/or invest it. Nonetheless, history has shown that most of it is likely to be spent on consumables and such items as televisions and iPads. Buckley (16-7) suggests that it is surprising that most people tend to rush out to purchase the same items. What happens is that the sellers have inadequate number of items, yet the demand is too high. They decide to raise the prices, and a massive inflation results (Printz 535).
Inflation means that the money in possession of Tapese would worth a lot less. For instance, if US$100 was enough to purchase a bag of corn, it may require US$200 or more to acquire corn of the same quantity. The money becomes valueless. In the end, the goal of increasing individuals’ purchasing power is missed.
According to Brown (34), there are those who say raising prices is greed on the part of the businessman, and that they would not do it if they were in business. The question is if this is really unavoidable. Supposing a seller of corn is finding it hard to meet the demand, they will get in touch with the suppliers and push for their case. On their part, the suppliers would pressure the farmers to avail more maize. The farmers might argue that for that to happen, they need to hire more labor force, and invest more in other factors of production. That, therefore, justifies the rise in prices at the source (Printz 540).
It is not if one would or would not raise prices, it is just that the new situation in the market will have caused a hike in prices at every level. A businessman must increase the price, or simply get edged out of the market. In essence, the increase in prices by the retailer might not necessarily mean that they are making super normal profits (Buckley 20-1). The margin might remain the same, or increase just a little bit. In fact, they might not even afford to do business in an environment where they must pay their employees more and the cost of everything else doubles. This is why prices keep on rising (Seitz 32).
The invention of money was an important step. Money is valuable, but printing more cannot make people richer. This is because the value that money has is derived from the available goods and services. The mere act of printing more money does not make more services and goods appear. What happens is that the value of the existing goods and services get spread-out (Cassidy 112). This is what inflation means. Essentially, the average price levels are equivalent to the available number of dollars divided by the available goods and services. It is apparent that doubling the number of dollars in the economy has the effect of doubling the prices. People do not become better off since wealth comes from the goods and services which money buy (Printz 555).
Brown, Abram. “Printing Money: October 1, 1969.” Forbes, vol. 198, no. 3, Sept. 2016, p. 34
Buckley, Allen. “Why DC Plans Make Sense for Taxpayers and Governmental Employees.” Journal of Pension Benefits: Issues in Administration, vol. 21, no. 3, Spring 2014, pp. 16–26
Cassidy, John. “Printing Money.” New Yorker, vol. 91, no. 37, Nov. 2015, pp. 111–114
Printz, Neil. “Making money/printing painting: Warhol’s dollar bill paintings.” Criticism, vol. 56, no. 3, Summer 2014, pp. 535–557. EBSCOhost, doi:10.13110/criticism.56.3.0535
Seitz, Patrick. “Crime pays for take-two: ‘Grand theft auto’ keeps printing money.” Investors Business Daily, 25 Oct. 2017, p. 32