The US is facing the worst ever economic crisis since the Great Depression in 1929. The sub primes, bankruptcy, people losing their jobs etc leads to one term - credit crunch. Well, if there's no money, then why can't they just print some?
I looked up on the internet as to why this can/cannot be done. To put it in a nutshell, the answer I got was "It might work, but the cure would be far worse than the disease. If you create more currency without raising the value of the whatever backs that currency, the value of the currency drops. That’s called inflation — you'll need more and more dollars to buy the same loaf of bread."
Currency, apparently is just a piece of paper (Tell that to the guy who does not have it). This paper is a representation of something. That something is the value backing this currency, which is the strength of the economy of that country, GDP or the reserves of gold, silver etc. Now, if the paper were to be just printed without actually increasing the value of what it represents, then the value of the paper would decrease.
Lets take a simple example. Lets say I have 200 grams of chocolate cake (Its my blog and I love chocolate cake!). I have 2 coupons to share this cake. Then the value of each coupon is 100 grams. If I photocopy the coupons each 49 times, I now have a 100 coupons. Thus making the effective value of one coupon just 2 grams. This should put the more dollars per loaf of bread in perspective.
Well, the verdict, I don't think its worth just printing.
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