Money

[nickie]

Stuiped question.... but if the world is short of money, why cant we just print more? I'm sure there is a very sensible answer!

[Loosehead]

cash only represents spendable wealth, 99.9% of money is not in cash. Printing cash with no representative wealth creates inflation which reduces the value of wealth generally.

[dzug]

The world is not short of money.

The world is (or may be - it''s debatable) short of the goods, etc, that money buys. Produce more of these and the problem goes away.

Germany tried this after WW1. You ended up needing a wheelbarrow full of newly printed notes to buy a sack of potatoes.

[Loosehead]

And of course dzug, famously people would tip out the money and nick the wheelbarrow! Maybe that was apocryphal but it's a good tale!

[nickie]

I think i see..... so money really is just paper.... its just an iou for something physical... So theres plenty of physical things that have value in the world but the iou's arent neccessarily distributed fairly...?

[Loosehead]

Almost Nickie, notes where originally backed up by gold, that's why is says "I promise to pay the bearer the sum of �x" this means that x pounds of gold where stored in a bank. The note became as good s gold and hence cash was born. Now days realisable wealth is represented by what it is possible, in theory to get cash for. That is not always something physical. For example when you but a business a certain amount is in physical things but also quite a lot is in the non physical form of "good will" or "regular customers". Football club's pay millions for players that they hope will deliver skill on the pitch that is not easily quantifiable value. Your boss pays your wages on what he hopes are your abilities.

[My Angel Pie]

Nickie, i have often wondered the very question myself since i was a child i think, so good to see i'm not alone and thanks to you all for the replies, now i finally know why.

[skilliyay]

just think if the goverment printed �1000 cash for everyone tomorrow, you'd want to go out and spend it right?
Retaillers would see this and immediately increase their prices to take advantage of the situation., which as loosehead expertly explains is inflation.

[-Zorro-]

It would affect inflation etc which would affect interest rates, which would affect cost of capital and investment and unemployment etc......Mr Brown tries to fine tune the economy and wont upset it like that.