How will printing more money help?

Discussion in 'UK Community Board' started by tony64, Feb 14, 2009.

  1. tony64

    tony64 <font color=blue>Should've been a Cowboy<br><font

    Joined:
    Jun 21, 2003
    Messages:
    8,997
    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?
     
  2. Avatar

    Google AdSense Guest Advertisement


    to hide this advert.
  3. natalielongstaff

    natalielongstaff <font color=deeppink>I need a cup of tea and a big

    Joined:
    Apr 7, 2004
    Messages:
    80,430
    maybe they are giving it away for nothing....oh no they already do that in lots of cases don't they :headache:
     
  4. Boss Hogg

    Boss Hogg <font color=green>It's 5 o'clock somewhere<br><fon

    Joined:
    Aug 8, 2004
    Messages:
    2,528
    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.
     
  5. emily1982

    emily1982 <font color=purple>Esteemed and very valued DIS Ve

    Joined:
    Dec 30, 2004
    Messages:
    2,569
    If they gave me some money i wouldn't say no :)
     
  6. tennisfan

    tennisfan <font color=blue>Was told off for sliding down the Moderator

    Joined:
    Jul 15, 2004
    Messages:
    25,799
    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:confused3
     
  7. Beth__WDW23/6/02

    Beth__WDW23/6/02 <font color=deeppink>you can never mock anything u

    Joined:
    Mar 7, 2002
    Messages:
    3,711
    Same here :rotfl:
     
  8. oceanscape

    oceanscape DIS Veteran

    Joined:
    Oct 22, 2006
    Messages:
    788
    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...
     
  9. Boss Hogg

    Boss Hogg <font color=green>It's 5 o'clock somewhere<br><fon

    Joined:
    Aug 8, 2004
    Messages:
    2,528
    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?
     
  10. thelittlemermaid83

    thelittlemermaid83 <font color=green>My reign will be a super-awesome

    Joined:
    Aug 14, 2007
    Messages:
    16,957
    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.
     
  11. paulh

    paulh <font color=blue>likes to have a beer<br><font col

    Joined:
    Oct 10, 1999
    Messages:
    5,512
    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
     
  12. paulh

    paulh <font color=blue>likes to have a beer<br><font col

    Joined:
    Oct 10, 1999
    Messages:
    5,512
    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
     
  13. Boss Hogg

    Boss Hogg <font color=green>It's 5 o'clock somewhere<br><fon

    Joined:
    Aug 8, 2004
    Messages:
    2,528
    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.
     
  14. Boss Hogg

    Boss Hogg <font color=green>It's 5 o'clock somewhere<br><fon

    Joined:
    Aug 8, 2004
    Messages:
    2,528
    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.
     
  15. paulh

    paulh <font color=blue>likes to have a beer<br><font col

    Joined:
    Oct 10, 1999
    Messages:
    5,512
    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
     
  16. paulh

    paulh <font color=blue>likes to have a beer<br><font col

    Joined:
    Oct 10, 1999
    Messages:
    5,512
    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
     

Share This Page