why cant we just print some more money?

thepinkladez_2

thanks for this thread, interesting reading! i too have absolutly no concept of inflation etc so this is all very interesting. Why dont they teach this type of thing at school!?(probably do in business class!)

pam_smith

What a good idea to teach this in school AND which mortgage is best for you
and whether to opt out of serps etc etc.....
Pam

sturll

And how to realise when she is not the one for you

ANY_CHANCE

I have found this useful too

Jacks_xxx

I remember during the decline of the USSR seeing people on the news in Russia and / or East Germany queueing to buy bread with a wheelbarrow full of banknotes, and being told that this was because the Russian treasury had devalued their currency so much that it was virtually worthless by printing more and more money. (and I think the East Germans printed more money to pay their war reparations which buggered up their economy good and proper!)

In order to check that I hadn't dreamed this I put "wheelbarrow" and "money" into google and it came up with this article:

http://digitaleconomy.wordpress.com/2008/07/31/creation-of-wheelbarrow-money/

Love Jacks xxx

PS Another wheelbarrow link:

http://www.dailymail.co.uk/news/article-1058049/Tom-Utley-Im-financial-dunce-But-I-wont-believe-doomed-till-I-barefoot-kids-pushing-wheelbarrows-piled-banknotes.html

(Land_of)_Maz

i must admit that all this financial talk lately has gone over my head... thanks to OP for asking... and thanks for the basic lessons folks!

thepinkladez_2

oh good i am glad that others have admitted that this type of thing goes over their heads too!i thought it was just me!

1694

Inflation is NOT the rate at which prices rise as per the Retail price index.

Inflation is a measure of the increase in money a someone stated.

Ask youself, if the BOE can't print more money to avoid inflation where does all our inflation come from, real inflation including, shares, house prices and commercial vehicles is way higher than 4.7%

The answere is the fractional reserve system where commercial banks create money from thin air.

Think:
You deposit £100 in cash, you have a bank statement of £100
Someone asks for a loan of £100 and gets a £100 credit to there account
They withdraw your £100 in cash-your bank statement remains at £100
You can electronically transfer that £100 to anyone else if you want to buy something on debit card.
So you have £100 on your debit card which you can spend, and the other person has £100 in cash to spend...the money is doubled!!! If money is doubled prices double, but your £100 stays the same (plus a little interest). Keeping your money in a bank makes you poorer, the only person that gains is the banker.

If however you decide to pay in cash instead of by card the banks call this a run on the bank and demand a government bail out.

ad9898_3

Of course if you have any kind of debt, then inflation isn't too bad for you, its just bad for everyone else. It could come to pass that good old Gordy may take this route (called hyper inflation), for instance interest rates are now below the rate of inflation, not a good situation to be in for long.

Hyper inflation though would reduce your debts, mortgages etc.., whilst they stay the same, wage inflation would eventually make the payments smaller.

For the wider economy this is extremely bad, as has been described above by other posters.

1694

So to answere your question the government could print more money aslong as they were taking and holding reserves of 1/9th what they printed. There would be no more inflation than now. They can only print more when they get more in.

If everyone put ther money in the nationlised banks, the government could hold these as a reserve, print 9 times that and lend it to banks at interest to help their liquidity for now. Then collect the interest onthe loans to the banks and use that money for public services, or simply lower taxes.