desib0y2011
Newbie
I always kept on asking people this question.
If India wants to become richest country, why not just print few TRILLION rupees?
Some people answered its not possible, but nobody has ever given me convincing answer on why it can not be done?
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Look at USA.. it just bailed out so many companies/banks.. how did they do it? Simply by printing money right?
Perfect reply by xred
Let me try and answer this. If we print a hell lot of money, we will probably end up being the poorer country than today. The reason being-
[*]If we print too much of money, then the availability of money with people increase, so they will consume more which will lead to very high inflation, called hyperinflation. So in real terms the available goods will become damn expansive. e.g. if you are buying a bread at rs 25 and you print 10 times the current price. So the same bread will become Rs 250. For more on this you may read-Hyperinflation - Wikipedia, the free encyclopedia
[*]The investor will not be buying the bond issued by the government, which will significantly increase cost of funding for government. So if any government just prints money to pay back its debtors, which will lead to hyperinflation, the government will be in no position to finance its deficit.
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Just an analogy:
If you mix one spoonful of salt in 300ml of water, and one spoon of salt in 3 liters of water, which mixture would be more salty?
Same applies for currencies (INR) - more you print it - more it becomes diluted and lesser it has the purchasing power.
How much of rice could you have purchased for Rs. 1000 some 15 years back?
How much of it can you purchase today using Rs.1000?
People say Gold, rice, and other commodities has become 'expensive' -
But in Reality, the INR in your pocket has lost it's power just because of "just print few TRILLION rupees" by Government.
If India wants to become richest country, why not just print few TRILLION rupees?
Some people answered its not possible, but nobody has ever given me convincing answer on why it can not be done?
----------
Look at USA.. it just bailed out so many companies/banks.. how did they do it? Simply by printing money right?
Perfect reply by xred
Let me try and answer this. If we print a hell lot of money, we will probably end up being the poorer country than today. The reason being-
[*]If we print too much of money, then the availability of money with people increase, so they will consume more which will lead to very high inflation, called hyperinflation. So in real terms the available goods will become damn expansive. e.g. if you are buying a bread at rs 25 and you print 10 times the current price. So the same bread will become Rs 250. For more on this you may read-Hyperinflation - Wikipedia, the free encyclopedia
[*]The investor will not be buying the bond issued by the government, which will significantly increase cost of funding for government. So if any government just prints money to pay back its debtors, which will lead to hyperinflation, the government will be in no position to finance its deficit.
[/list]
Just an analogy:
If you mix one spoonful of salt in 300ml of water, and one spoon of salt in 3 liters of water, which mixture would be more salty?
Same applies for currencies (INR) - more you print it - more it becomes diluted and lesser it has the purchasing power.
How much of rice could you have purchased for Rs. 1000 some 15 years back?
How much of it can you purchase today using Rs.1000?
People say Gold, rice, and other commodities has become 'expensive' -
But in Reality, the INR in your pocket has lost it's power just because of "just print few TRILLION rupees" by Government.
