Why can’t the government print more money? Answering the basics.

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Let’s print more money, distribute it to all citizens, and solve poverty. Sounds easy? Not really. The central bank controls the money supply and determines the amount circulated in an economy. It’s not that easy to print money not because of the machine’s capacity, but because of the economy. Printing a lot of money results in inflation and devaluation of currency. This takes us to the basic understanding of demand and supply. Printing more money results in an excess supply of money. People will have more money implying that they will have more purchasing power. People will now demand more goods and services but the supply remains constant. As a result, the firms are determined to increase the price of goods and services. You can no longer buy the same goods/services with the same amount of money. This results in inflation. Inflation results in a disincentive to save, increased menu costs, and economic uncertainty—increased inflation results in lowered purchasing power of the currency, resulting in devaluation of the currency. 

And the 2008 hyperinflation in Zimbabwe explicitly sets an example. The increase in money supply by the Reserve Bank of Zimbabwe resulted in 79,600,000,000% inflation (Nov 2008). People now couldn’t even afford basic necessities. Despite having billions of wages, it was still difficult to afford basic food necessities which cost double their wages. Slowly businesses started losing confidence and people lost their savings as well. People were now in a rush to exchange their foreign currency. The government also stopped printing the dollars and encouraged everyone to use foreign currency. Eventually, the hyperinflation was resolved by converting all Zimbabwe dollars to US dollars. 

All in all, printing more money may be a short-term solution but in the long run, it invites economic catastrophes which history has very well spoken about.