Opinion

PRINTING MORE MONEY IS NOT AN OPTIONS

Dr. Moyi Harry Ruben 211 922 442 554

Understanding the financial markets is more complicated than we think, Money markets control the whole world. In so call commercial capitals, London, Tokyo, Shanghai and Wall Street in USA.  Money is nothing than a mere paper, but because of its legality of tendership, it over rule the barter system. when faced with uncertainty we think it is money that causes the problem and could solve this by printing money. This may not be the case example, 1. Printing money and the effect on the value of the Currency. If a country prints money and creases inflation, then there will be a decline in the value of the currency. Suppose inflation in South Sudan is 100% and inflation in Sudan is zero percent, this means South Sudan prices are doubled compared to Sudan. You will need twice as much South Sudan currency to buy the Same quantity of goods to that of Sudan. The purchasing power of South Sudan currency will have declined and therefore the value will fall on the exchange market. 2. Printing money does not always create Inflation. Yet, during recession, with period of deflation, it is possible to increase the money supply without causing inflation. 3. Printing money and effect on exchange rates. Printing money reduces the value of currency and therefore inflation reduces the value of domestic securities (Currency) making international investors leave the economy. Hence, printing causes the fall in the purchasing power parity of the currency. 4. Printing more money and the effect of National debts. Countries borrow by selling Bonds, and Gilts to private Sectors. Bonds are a form of savings. People buy government bonds because they assumed that government bonds are safeinvestment, however, this is good if inflation remains constant. If government print money to pay off National debts, this will cause inflation, this increasing inflation could reduce the value of the bond. If inflation increases, people will not want to hold bonds because the value of the bond will be falling. Therefore, the government will find difficult to sell bonds, to finance national debts. They will have to pay higher interest rates to attract investors. If the government print too much money and inflation gets out of hand, investors will not trust the government, it will be hard for the government to borrow any money at all. 5. Why risk Money printing when you know it could cause inflation? The prospect of deflation is much worse than inflation. Deflation could make a minor recession into a prolonged depression. Deflation is very damaging to the economy because it discourages spending and increase burden of debts to the future generation. 6. The effect of printing more money to the economy. Printing more money or talk about changing money creates a sense of nervousness amongst both economists and the general public. It immediately conjures up memories of hyperinflation example Weimar Germany in 1923 and Zimbabwe more recent time. So if government or central Bank talk about changing or printing money care has to be taken. If the news is trusted and good, there will be immediate fall in the rates of foreign currencies against our pound, but if the news lack trust, the other currencies valves will go up against the pound as in our case a week ago. Therefore, when the government resort to printing, talk about money, and when they cannot finance their borrowing by selling bonds and TBs, this will cause hyperinflation. Hyperinflation can be extremely damaging to the economy. Financial markets listen to three institutions and they will react accordingly. These institutions are: The office of the president, Ministry of Finance and central Bank. Any Statement from these institutions about money is taken serious by the money market. So, such statements must be control and come from competent authority, otherwise the statement will be damaging to the economy.

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