How can money be created?

[johnbond007]

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It came to my thought that money is just man-made but why can't the country or the government make/produce more money in order to pay the debts internationally and improve the life of the Filipinos? If money can be created, why can't the government make more of them so that they could put up more establishments/companies and offer very high paying jobs for each Filipino so that no one will suffer and even live in poverty and maybe, no one will have to work abroad just to earn bigger income. I'm poor in Economics that's why i don't understand how it works. Maybe some knowledgeable fellow Istoryans here could share their brilliant thoughts about it especially those who were/are taking up BS Economics.

[tapsikret]

As i understand it you have to have a balance with your gold reserves and money. If you just print money inflation would be out of control

[cosplay]

Gold reserves are the ones needed to be paid. Money is just the representation of the value the golds we have in possession.

[johnbond007]

Could you be more specific how these things like gold reserves work in the economy? I mean, how money, gold reserves, the inflation thing are related with each other? How is money created man di ay? This question always sprouted in my mind but i never knew the answer. I'd like to learn the details of this topic.

[vern]

Wikipedia has all your answers ... whether you choose to read into them or not ...

Monetary policy - Wikipedia, the free encyclopedia
Quantity theory of money - Wikipedia, the free encyclopedia
Economics - Wikipedia, the free encyclopedia

[cosplay]

Vern is right. Use the internet since you have it.

[johnbond007]

maybe someone there could give a very brief and concise and explanation and yet very understandable. Lisod kaayo tu sabton wikipedia kay daghan kaayo technical terms.

[vern]

maybe someone there could give a very brief and concise and explanation and yet very understandable. Lisod kaayo tu sabton wikipedia kay daghan kaayo technical terms.

This is exactly your problem ... you want answers, but don't want to read. If you can't be bothered to read, why should others be bothered to explain?

I'm just going to say this, all money has to be backed by something tangible ... gold, silver, etc.

[rodsky]

Let me give my take on this.

Before money was invented, if a man was hungry, he can do one of three things:

1. He can look for food in the wilderness.

2. If he can't find it in the wild, he can then do one of two things... he can steal it from another man, or,

3. He can work for someone and get food as his reward for the work.

Ergo, the need is satisfaction of hunger. The solution is food.

This worked well for a while. But then soon, there were more and more people on the earth. It was very difficult to keep track of who was working for who, and how much food was needed to be allocated to someone. Thus, something had to be invented, a substitute for the food, for easier transactions. It had to be small enough so that it can be carried in the pocket. It had to be sturdy to stand the passing on to many hands. But most of all, it had to prove that it had value, so it must look good. Ergo, money (i.e. coins) was the first virtual item to be developed. It was real, yes, because a coin had a physical appearance and feel, gold looked pretty...however, the value of it was virtual--you cannot eat the coin, it cannot satisfy your hunger--what you needed was food, but the coin represents a virtual value--it substitutes the value of food.

Since then, after money was invented, most people forgot what value really is--they became so engrossed with the idea of accumulating vast amounts of money, when they forget that in essence, it is only a virtual concept--true, it's almost impossible to live in this world without money, but real value is not in the money, but in the items of necessity and luxury that they virtually represent (recall that scene in the "I AM LEGEND" movie, when Smith found that room full of money...all useless, because they do not represent anything tangible anymore, they ceased becoming a virtual thing...they became real pieces of worthless paper).

Ergo, will you allow the minting and printing of a virtual item--coins and money--without it having an equivalent VALUED necessity or luxury, in exchange? If you do that, then that coin would be useless, because it does not have the power to represent something of value, which you need.

I hope the story helped clear things up.

-RODION

[vern]

That didn't explain the gist of the question at all

If money can be created, why can't the government make more of them so that they could put up more establishments/companies and offer very high paying jobs for each Filipino so that no one will suffer and even live in poverty and maybe, no one will have to work abroad just to earn bigger income

The question was not why there is a need for money ... that is obvious ... but why can't a government just increase the supply of money to pay of it's debts. The perception of money is not in question.

The reality is that back in the old days, if you had a dollar, you had a coin that was made of gold that was worth one dollar.You would be able to trade your coin anywhere you went and it would still be worth one dollar because the value of the coin was with the coin itself. These days, coins aren't made of gold. People don't carry treasure chests around ... yet every piece of paper money or copper coin the government makes has to be insured by the government that it has the goods to back it up. That is why the Philippine government can't issue a trillion dollars worth of pesos if it wanted to. You can't pay bills with paper money as strange as that sounds. Just when you thought cash was king. Some troubled countries have inflation rates in the hundreds of thousands (ie Zimbabwe) ... making their currency virtually useless. The currency might be useless ... but a dollar worth of gold is still a dollar worth of gold in the world's market.