How will printing more money help?

[tony64]

Hi
I've heard the government are gearing up to print more money.
I know this has been done in the past but no matter how I look at it I cannot see how it will make any difference.

Who gets this extra money? how would more money in circulation help matter?

Am I being think? I just don't get it?
Any money experts able to explain this in laymans terms please?

 

[natalielongstaff]

maybe they are giving it away for nothing....oh no they already do that in lots of cases don't they

 

[Boss Hogg]

I'm no expert, but as we all know I've an opinion on everything!!

To the best of my knowledge, in the case of the UK, the term "printing money" is actually a synonym for something called "quantative easing". This is where the Bank of England purchases assets using money which doesn't come from anywhere, so it creates the money with a touch of a button.

The reason for doing this is that it creates more money in the "system" which should mean it flows around better.

You'll have heard that people are saying the problem with the economy at the moment is the lack of money and credit flowing, it is thought that such actions may improve this.

There are precedents for this sort of action, albeit in a couple of cases it was simply printing money. 1930's (I think) Germany and Zimbabwe under Mugabe, and I think most people think it was a really really bad idea.

The risk in "printing money" is massive inflation, as the value of the currency comes down, so to keep up with this, prices have to go up - think about what would happen if your £1 was be worth 50p..

Also, the other downside is as the currency's value drops the exchange rate to other currencies could also be affected and so the £ would drop against other currencies - naturally this is good for as many people as it is bad for.

As I said, I'm no economics expert and if the Bank of England are considering it, then one would hope they think they are able to cope with it.

 

[emily1982]

If they gave me some money i wouldn't say no

 

[tennisfan]

I'm no expert, but as we all know I've an opinion on everything!!

To the best of my knowledge, in the case of the UK, the term "printing money" is actually a synonym for something called "quantative easing". This is where the Bank of England purchases assets using money which doesn't come from anywhere, so it creates the money with a touch of a button.

The reason for doing this is that it creates more money in the "system" which should mean it flows around better.

You'll have heard that people are saying the problem with the economy at the moment is the lack of money and credit flowing, it is thought that such actions may improve this.

There are precedents for this sort of action, albeit in a couple of cases it was simply printing money. 1930's (I think) Germany and Zimbabwe under Mugabe, and I think most people think it was a really really bad idea.

The risk in "printing money" is massive inflation, as the value of the currency comes down, so to keep up with this, prices have to go up - think about what would happen if your £1 was be worth 50p..

Also, the other downside is as the currency's value drops the exchange rate to other currencies could also be affected and so the £ would drop against other currencies - naturally this is good for as many people as it is bad for.

As I said, I'm no economics expert and if the Bank of England are considering it, then one would hope they think they are able to cope with it.

Thats the way I see it. Money isn't flowing freely between banks due to the rates being so low savers have lost faith & withdrawn their money making the situation worse. As the money isn't flowing freely banks are more reluctant to lend money making the economy even more fragile.

Having said that it could backfire & cause inflation to rise meaning more economic problems.

The low interest rates are great for people with loans, mortgages etc but the savers have suffered & apparently there are more savers in the UK then with debt so go figure the rate drop

 

[Beth__WDW23/6/02]

If they gave me some money i wouldn't say no

Same here

 

[oceanscape]

Physically printing more money into circulation will have the effect of reducing the real value of our debts. However, there are negative side effects, too...

 

[Boss Hogg]

Physically printing more money into circulation will have the effect of reducing the real value of our debts. However, there are negative side effects, too...

In real terms I'm not sure this would help, as not only will debts reduce but so will the value of what you have to pay them with, so everything goes down, and I guess (in simple terms) would equalise at a lower value in the future, so long term would it make any difference?

 

[thelittlemermaid83]

I remember asking my mum about this the other day, naive old me was wondering why they didnt just print more money and dish it out to help the economy.

 

[paulh]

personly it wouldnt matter as nowadays in the so called cashless societys,There is more invisable cash around than printed cash,ie credit cards ect so printing money wouldnt make a blind bit off differance,
in places where not many CC abound it might work but with the business model of Zimbabwe showing it wont work
Its getting the banks to work will sort this mess out event thought they got us into this mess in first place
Paulh

 

[paulh]

In real terms I'm not sure this would help, as not only will debts reduce but so will the value of what you have to pay them with, so everything goes down, and I guess (in simple terms) would equalise at a lower value in the future, so long term would it make any difference?

inflation over time reduces the origanal debt. say loan £1000 with a 10% charge and when i took it out i earned £10/hr would take 110 hrs to pay off if my wage incressed by 10% would take 100 hours to pay off,so over time infation reduces the origanal debt.look at house prices whick your mum and dad paid
Paulh

 

[Boss Hogg]

personly it wouldnt matter as nowadays in the so called cashless societys,There is more invisable cash around than printed cash,ie credit cards ect so printing money wouldnt make a blind bit off differance,
in places where not many CC abound it might work but with the business model of Zimbabwe showing it wont work
Its getting the banks to work will sort this mess out event thought they got us into this mess in first place
Paulh

Whilst I would agree with the cash vs cashless society, printing more money would have a massive impact and drive inflation up, regardless of whether cards are more prevalent.

 

[Boss Hogg]

inflation over time reduces the origanal debt. say loan £1000 with a 10% charge and when i took it out i earned £10/hr would take 110 hrs to pay off if my wage incressed by 10% would take 100 hours to pay off,so over time infation reduces the origanal debt.look at house prices whick your mum and dad paid
Paulh

But at the same time as reducing the debt, it eradicates the value of your pay at the same rate, and that would be more marked if we had high inflation due to devalued currency. Hence when there is high inflation, inflation sized pay increases are so important, otherwise your pay is decreasing.

 

[paulh]

Whilst I would agree with the cash vs cashless society, printing more money would have a massive impact and drive inflation up, regardless of whether cards are more prevalent.

its not just the CC isue its the line off credit for buisness,mortgages and overdrafts ect that they should be pushing.i just use a cc as an example of a cashless society.
Inflation is good for an economy but rampent inflation isnt
Paulh

 

[paulh]

plus with pushing rates down so fast there not alowing time for them to work,got a statement from one of my accounts yesterday and it was giving 0.79% intrest.glad were using that money for florida
Paulh