ELI5: Why can't countries just print unlimited money?
If countries printed unlimited money, the money would become worthless, like Monopoly money.
Imagine you and your friends are playing a game where you trade toys. Let's say everyone starts with 10 toy coins and can buy different toys. If someone suddenly printed a million toy coins for themselves, would their toys become more valuable? No! Because everyone else still only has 10 coins.
- The person with a million coins might buy all the toys at first, but soon everyone will realize that since there are so many coins, each one is worth very little.
- The price of toys will go way up (inflation), because people will need way more coins to buy the same toy.
- Eventually, the coins are practically useless, and you might as well trade toys directly without them.
- Businesses will raise their prices because people have more money to spend.
- Your savings become less valuable because your money buys less than before.
- The value of your country's money compared to other countries' money (exchange rate) will decrease. This means it will cost more to buy things from other countries.
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