Why can’t we just print money and make everyone rich?

A common question about money is: why doesn't the government just print a lot of it and give it to everyone? This way, we could eliminate unemployment, make everyone rich, pay off debts, remove fines and taxes, fix everything that needs fixing, and create a peaceful, prosperous world. This question, asked by both children and adults, seems simple, but the answer is complex and counterintuitive. If the government prints a lot of money, it won't make people rich; instead, it could make them poorer, cause the state to collapse, and lead to severe economic problems.

A common misconception is that if the state prints a lot of money, everyone will be rich, and no one will need to work. Farmers wouldn't tend to their crops, workers wouldn't go to their jobs, and employees wouldn't show up at the office because they'd already have all the money they need. This explanation is completely inaccurate. Another misconception is that the amount of money printed is tied to the amount of gold in the state treasury, but this system is no longer in use. Some believe there is a global committee that controls how much money a country can print, but this is also incorrect. Countries have the freedom to print as much money as they want, but they don’t because of the consequences.

Historically, countries that have tried to print excessive amounts of money faced disastrous results. For example, after World War II, Germany printed 90 trillion marks to address its economic crisis, leading to extreme inflation and rendering the currency worthless. Pictures of children playing with piles of money and people using money for fuel because it was cheaper than wood were common. Similarly, Zimbabwe printed large amounts of money to solve economic problems, resulting in hyperinflation where a single egg cost billions, and people needed cars to transport money for basic purchases. Despite having a huge amount of money, Zimbabwe declared bankruptcy, worsening its economic crisis.

The root cause of these crises is inflation, which occurs when the supply of money exceeds the limited quantity of goods and services. Printing a lot of money increases demand for products, but if the supply remains unchanged, prices will rise. For example, if someone's salary increases from 1,000 to 10,000 pounds, they might buy 10 kilos of meat instead of one, leading to a shortage and higher prices. This devalues the currency, as more money chases the same amount of goods, reducing purchasing power.

To illustrate, imagine an isolated island with only two people, Jojo and Yaya, each with 100 pounds and two kilos of wheat priced at 100 pounds per kilo. If the island’s government prints more money, giving each person 200 pounds, they aren't richer because the amount of wheat hasn't changed. True wealth is determined by goods and services, not just the amount of money. For a country to be rich and have a strong economy, it needs to increase production, not just print more money.

Printing money without increasing production leads to inflation and economic instability. In contrast, if a country limits money supply while boosting production, the value of its currency increases. Money is subject to the law of supply and demand: the more money in circulation without a corresponding increase in goods and services, the weaker the currency. Conversely, a currency with limited supply and substantial economic backing is strong and valued.

For instance, China prints money proportionate to its economic growth, maintaining a balance between currency supply and production. While the value of the Chinese yuan might be low compared to the dollar, it is supported by a robust economy. Therefore, printing a lot of money is only beneficial when matched by significant production increases. Without this balance, excessive money printing leads to inflation, economic crises, and ultimately, poverty.