Another way to raise the funds for federal budget deficits is to create new money (the popular term is print money) for the government to spend. While a growing economy requires a larger volume of money in circulation (called the “money supply” by economists), it is dangerous to increase the money supply too quickly. The inevitable result of such a policy would be severe inflation, as the excessive amount of money in circulation forces prices up rapidly. Thus, while it may be tempting for the government to simply “print money” to finance its budget deficits, this should be done only within limits, so as to avoid increasing the money supply by more than the economy can absorb without rapid inflation.
*The government does not actually physically print new money for itself to spend. The process is more subtle than that, and will be examined in detail. However, the economic effects of such a policy are such that it can reasonably be described as “printing money.”
Related Websites - Are You Handling Your Money Like a Rich Person Would? Being a wealthy person isn't always about having a lot of money. It has a lot to do with how you think about your money and the other things of value in your life you often overlook. Your mindset has...
- Pearl Jam, Giants, and Personal Finance Links As usual, I'm going to ad lib a little bit before getting to the personal finance links. If none of the topics in the title are interesting, perhaps it is best to move to the links (or come back later...
- Consumers Drop the F-Bomb on Government Economists The consumer engine that drives our economy isn't returning to its borrow and spend ways. "F---you" say consumers who refuse to comply with the pleas of government economists that we revert to our bad habits of yesteryear. This is most...
- Devaluation of the College Degree If you graduated from college in the 70's or 80's, get ready to be extra proud of that degree. The next generation of college graduates will also be receiving degrees. But many of them won't be worth much compared to...
Tags: Amount Of Money, Auto Finance, Circulation, Economic Effects, Economists, Economy, Federal Budget Deficits, finance, forex, Government Money, Inevitable Result, Inflation, Money Supply, New Money, Print Money, Printing Money