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(87 People Likes) How does it work?

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(78 People Likes) How does printing money cause inflation?

The invention of money was a good thing because it replaced a cumbersome barter system used in commerce. If you grew yams and wanted fish, you had to find a fisherman who wanted yams and that was very cumbersome and commerce was slow.
Somewhere along the line our ancestors decided they would accept gold in exchange for goods. Thus, money was invented. Commerce and trade took off making civilizations wealthier. Why gold? It was a stable commodity and it kept its value relative to goods. More importantly, it couldn’t be easily made, unlike our paper money. It worked pretty well for thousands of years.
See this for a simple explanation of the development of money: Money: A Semi Fictional Fable
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The thing you need to understand is that you had to produce something in order to get money. Whether it was yams, fish, labor, or something else other people wanted, you had to offer something of value to your fellow citizens. Nobody gives away fish for free.
But today the foundation of our current monetary system is literally just a nice piece of green paper. It’s not based on production and it’s not backed by anything. Central banks can print money (more likely by a keystroke) at will. This is why we have inflation.
Yes, people want dollars … until they don’t. Central banks today believe they can just print money at will and like a little machine the economy will respond and everything will be fine. Not so. If we could create wealth by just printing money, then we could end poverty and Zimbabwe would have been the richest country in the world.
Why do prices go up when the government prints money?
First, "Inflation" is when pretty much all prices rise in an economy. If there is an oil shortage and gasoline prices go up, assuming the supply of money is stable, the extra money spent on gas means you have less to spend on other goods and those prices go down as gas prices go up.
All prices go up because more money is created (supply) than people want (demand).
Central banks and governments create new money mainly by “printing” it (quantitative easing). They buy Treasury bills and notes from major banks and pay for them by a few keystrokes that increases the bank deposits of the seller banks. They also create money by lowering interest rates which makes borrowing more attractive to bank customers.
Banks create money by lending their customers’ deposits. How? Because they only need to keep 10% of deposits on hand as reserves and they lend the other 90%. If I deposit $1,000 into my bank, it can lend $900 to one if its customers. If that borrower buys lumber for $900, the lumber seller now has $900 in her account and her bank now has another $900 of deposits. Her bank can now lend $810 (90%) of her deposit to one of its customers. That borrower in turn buys $810 from someone and that seller has $810 in his account and his bank can lend out 90% of the $810, or $729 to another customer, and so on. There is a kind of geometric increase in money supply. My $1,000 deposit can turn into over $9,000 in the economy and, thus, money is created out of thin air.
Let’s say a housing developer decides that low interest rates make his planned projects now look profitable so he gets a bank loan. The banks want to lend because they have all this new money. The developer now flush with new money bids away resources (lumber, labor, etc.) from other builders and Realistic Sex Doll here is more competition for these scarce resources. The next builder finds that he has to pay more for lumber. This competition for resources drives up prices. This can go on for quite a while as new money is constantly pumped in. The sad thing is that the poor sap at the end of the line only sees that prices have already gone up for him.
Prices of everything start to rise as a result of the constant push of new money. As building materials go up, housing prices go up. As people find that mortgage loans are cheap, demand for houses increases. They start to speculate thinking prices will continue to rise, thus more demand for housing drives up prices even more. While housing is just one example of how prices rise, expand this concept to other goods produced, and eventually all prices go up.
If enough money is pumped in we get a boom-bust cycle.
A good example is the 2008 crisis. It is clear that the Fed pushed many, many billions of new money into the economy in 2001- 2004 by lowering interest rates (from about 6% to 1%) which drove down bank loan rates which spurred bank lending. And we all saw what happened: home prices took off, the stock markets took off, crazy investment vehicles were spun off. People went crazy because of inflation.
When the Fed took its foot off the money machine in 2006, by 2008 the whole thing collapsed resulting in a bust. What happened is that we ended up with houses that no one wanted.
So, not only did prices go up but the entire economy was distorted by money printing. Some economists say that "inflation" is not just prices going up, but it is actually money printing itself that is "inflation" and market distortions and rising prices are the result. This is nothing new. Boom-bust cycles are always caused by central banks or governments printing too much money. History has shown that new money always flows somewhere, creating a frenzy. Mostly it's real estate or stocks, but sometimes it is tulips.
At its worst, hyperinflation is the result. Zimbabwe is one of the best examples of modern hyperinflation where central bankers had no clue what they were doing because they didn't understand what money was. They just printed and printed. The government used the new bills to pay for stuff and, there being not accompanying increase in production, prices climbed geometrically and Zimbabweans soon realized that the paper was worthless and they got rid of it as soon as they could because they knew that prices would be higher the next day. As prices climbed, their dollar bought less, and the end result was their famous $100 trillion bill. Ultimately goods disappeared f

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(24 People Likes) How much do sex robots cost?

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The solution to wanting to buy something but not having the money is almost universal. Get more money first, then

(47 People Likes) Is it illegal to own a love doll that looks like she could be in high school? There are some amazing dolls out there.

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