Why can't we print money?
 

Okay, I was having a conversation last night and this came up. It's a hypothetical situation and I'm sure some economics genius here could explain this to me.

Assuming we're only talking domestic business here so no international ecominics comes into play.

Assume it's possible to enforce a law in which there is a price freeze on EVERYTHING and so no prices anywhere in the US on any single thing can change.

The government prints and issues $1million to every single citizen 18 years or older.

Why would this not work? I know that if they just printed money without the price freeze assumption that the dollar would devalue because of human greed raising prices. But with the price freeze what would happen instead?

The US is already doing this...:2 cents:

?? There certainly isn't any price freeze going on here.

not everything is made in the US, how would you eg suggest a pricefreeze on oil?

my 500k in the bank would be worthless

inflation sucks... been getting worse and worse over the past few years

Any hypothetical situation, assuming that certain things "don't come into play" that they wish, can work 100%.

because there is a huge threat to that model, what happens when someone obtains most of the money by trade?

It's a hypothetical scenario. I'm trying to determine if the dollar gets devalued only because of human greed or if there are hard factors that make it so. If you want to go the route of considering everything then just extend the terms to the whole world is issued that equivelant by their respective governments and all prices worldwide are frozen.

Yeah the germans did that in WW2 stamps of 10 million. Imagine what that would do to your savings :disgust

I'm not saying it's going to work. Obviously it's not practical. As I said above, I am wondering what really drives the dollar value... is it human psychology and action or is their a definitive factor? Remember money is just a bunch of shit that gets printed on. We all agreed to make it worth something.

there are close to a 1000 parameters Im sure there are.

As long as they dont do the same in the US as they did with Turkish money (divide it by a million or so) Im happy.

until human beings reach the enlightment like star trek, then there will always be a form of slavery... right now in the usa the only real difference is knowledge, and obtaining the knowledge to gain capital is only given to a select few (mostly the affluent classes)... with more social reform and social projects this could change (basically altruism) for the better of the society at a whole... but imagine burger king having stock options and making it employee owned... I guess what I am trying to say is that capitalism thrives on one person making money from someone else.. a non-zero sum.. so someone has to lose money for the other to gain... I personally like the star trek model...

well the whole trading for something idea is damn old Im sure you know. Even the idea of different values to different things like rocks or shells is damn old.

Theres no way back, but to imply human greed is making the dollar go up n down well you might be able to prove that yeah.

Scenario is not possible but if it was then this is what would happen.

Quick version: OK everyone has a million bucks and prices are frozen so you stay at home and enjoy spending the million bucks - pay your mortgage off and when the balance runs out go back to work. Great except everyone does the same so as no one works, nothing is produced, no food in shops no one to serve in shops or whatever - anarchy then follows and your million is worth next to nothing as you have no food and eventually nothing else that makes life bearable.

Yeah I'm not suggesting we do any of this. I wasn't even wishful thinking. All I wondered was if the dollar value is based on something other than supply and demand which are human factors considering you can make any supply you want. So is the economy hardwired to a tangible thing that no matter what human factors you eliminate (price freeze elminates greed), that the dollar fluctuates outside human factors?

I imagine if this scenario could somehow occur it would still cause problemns because some people would spend all that $1mil and get shit on credit and what have you and we'd end up with the same disparity we have today with more zeroes on it. Other than a few smart middle-class people who go and save a bunch of it, it'd not change human condition long term all that much. but would the dollar value change?

True too. Still doesn't answer my question 'bout the value of the dollar though. You also made me think that all the hot girls doing porn would stop too! That would be a real crime!!!

well weve been saying for a few 100 yrs its supply n demand but lemme think

let turn it vice versa, if there would be no supply and demand would the dollar go up n down?

maybe by papershortage printing dollarbills and making paper more expensive thus more valuable etc

but still no i dont think the dollar would go up n down other then by supply n demand

There's something about the gold standard having to do with it too right? I wish I knew economics like I knew porn. I'd probably own office buildings by now if I did. :pimp

because a plumber aint gonna wade through your shit if he is a millionaire..

Currency is backed by the economy.

Say the current US average income is 50k per year.

Say you stop everything and printed a new kind of money and gave everybody $1 million of the new money.

The $1 million would be worth $50k of what the old money was worth.

Thats because everybody gets the same and the previous average across the board was 50k

Which means that something that use to cost a $1 now cost $20

Except that the value of any country's currency is based on the economic health of the country and if the country goes to hell in a hand basket then the currency is ultimately just junk paper

Put it this way you are on a desert island with a million bucks but nothing to purchase. What 'value' does the million bucks have? Or what value did a confederate million bucks have after the civil war. As the confederacy was destroyed the money it printed would be valueless.

oh and the hot girls will still put out for the guys who can protect them from the anarchy!

yes there are a few standards, dont know the english words but basically its

golden standard = banknotes are approx covered by gold

goldcore standard = same but ppl cant trade in the notes for gold

golden coin standard = 100% coverage on the notes and trade in for notes

well the ppl who changed the old EU money for the Euros sure didnt do that lol

they said 2.20 old dutch guilder was 1 euro AND (after a couple of yrs they said yeah we did that) increased prices on some products by 10-15%

Admittedly I don't know much about economics and currency, but I always thought the amount of money printed and passed in to circulation was somehow based on the amount of gold bullion equity the country retains.

Why can't you print money, give everyone a million dollars, and freeze prices on everything? How about a challenging question next time?

Who would be left working? Everyone would be out blowing their free million (the working class anyhow). There wouldn't be enough work force left to produce anything so everything would be bought up immediately and everyone would be screwed. Those that did want to work surely wouldn't work for the same $7 to $20 an hour that they recieved before your experiment. Businesses would have to pay them more money which would cause them to actually lose money on the products or services they were offering. Almost every business we are used to would be forced to shut the doors. Internet businesses would have 0% chance of survival.

With nobody working anymore you also run into all kinds of problems like no fire department, no police, nobody to make sure your drinking water is clean or even comes through the tap anymore.

The trade system doesn't work either. The only thing stupid / elderly / disabled people would have to trade is the million dollars you gave them. This wouldn't last too long.

In short, your idea would cause 100% complete and utter chaos, pandemonium, rioting, looting, violence, rape, murders, and everything else under the sun. You would be labeled the antichrist for coming up with such a dumb idea and the Christians would burn you at the stake.

Smart people and con artists would find ways to get most of everyones money and you'd be right back to the class system that you are attempting to get rid of. Super rich, rich, hanging on, dirt poor. Only the hangers on could never do anything to move up after a certain amount of time in the dreadful world you would have created for them. Good job.

Everyone would try o buy a house for $500k but there wouldnt be enough.

nah u.s. money isn't owned by america , its basically a representation of a loan , by a private group of rich people

If they put a 1000000x more of the euro in circulation then 2.20 dutch guilder would be worth 1,000,000 euros.

Who would work? What 18 year old is going to be making my fries at McDonald's when he has $1,000,000?

They use to back it on Gold. But not since the 1930's

thats true yes I just meant they were smart enough here to exchange for the euro PLUS increase price levels at the same time, so noone really noticed until a lot later

private group of people running the federal reserve

You didn't read my terms. If there was a price freeze no one could jack the price like that.

Good point... if we could all buy everything then there'd be nothing left to buy. So supply and demand is inherently needed or we'd burn through all our resources.

Oh, then everything would simply fall apart and your money would be worthless

Yaya I didn't thing it would WORK. All I wanted to know is if the value of money was based on human greed but actually looking at the practical truth of it as you're spelling out really answers it in a roundabout way anyway. It HAS to be based on supply and demand and human factors or it's meanignless anyway.

Interesting... could you elaborate?

The federal reserve is a private company not a government organization

Okay so this company does what then? Ensure that every dollar is backed by a stack of gold or what? What's the purpose?

I'm gonna take all this knowledge now and then get one of those online degrees in Economics then start an infomercial on how you can get your degree just by going to GFY!

I have a rough idea on what they do..

but its probably easier for you just to read this

http://money.howstuffworks.com/fed1.htm

Where's the motivation for a checkout clerk to continue working when he has a million dollars and the price of everything is frozen? There are certain jobs that some people will only do because they need to make a living. Give them a million dollars with frozen pricing, and they will not work and society will fall apart. Unless you want to fill in for the toilet cleaning millionaire.

Excellent, thanks. =]

Supply and demand. Any attempt to dumb it down further is pointless, regardless of how hypothetical the question is.

There are some interesting conspiracy theories about the FED since it's private and has a monopoly on money.

I don't know how much merit they hold but it's interesting none the less.

The FED has private stocks and things like that but I have no idea how that works.

http://www.frbsf.org/images/graphics/ar14.gif

Despite predictions of a "cashless society" relying on electronic payments, the public demand for currency continues to grow. Debit cards used for purchases and transaction records could greatly reduce the need for cash, but paper currency still has the advantage of privacy...more

2hp

Yeah I think this little thought experiment has supported that statement pretty well. How about that though... an intelligent discourse on GFY?!

That right there is so stupid it's not even funny anymore :1orglaugh

You're smarter than this, I'm sure :winkwink:

Those who have responded simply "supply and demand" are only half right -- :winkwink:

Money itself is not, MUST NOT be subject to supply and demand effects.

A centralized money system exists to provide for supply and demand effects in Things.

chodadog -- :thumbsup






2hp