In spite of having the printing resources, why does a country still can’t print unlimited money and give it to its population, pay off its debts, combat the recession? Why can’t an impoverished country simply print more money and become wealthy? There are no restrictions on a government to print money. Why don’t they print as much money as they want?
The explanation can be summed up in one word: Hyperinflation.
The term Hyperinflation is used to describe an economy’s rapid, excessive, and out-of-control price increases. While inflation is a measure of the rate at which prices for goods and services rise, hyperinflation is when prices rise at a rate of more than 50% each month. Hyperinflation can cause a price spike in basic goods, such as food and gasoline. Hyperinflations are uncommon, but once they start, they can quickly spiral out of control. Normal inflation is tracked in monthly price rises, whereas hyperinflation is recorded in exponential daily price increases that can range from 5% to 10% per day. When the inflation rate hits 50% for a month, it is called hyperinflation.
In recent history Hyperinflation has occurred in Zimbabwe in Africa and Venezuela in South America. Hyperinflation occurred when these countries issued more money in an attempt to boost their economies. When Zimbabwe was hit by hyperinflation, in 2008, prices rose as much as 231,150,889% in a single year. Imagine how a one Zimbabwean dollar worth packet of bread would have cost 231 million Zimbabwean dollars a year later due to hyperinflation.
Before we go into detail about what happened in these countries, let’s take a closer look at the core cause of rising prices of goods and services when a country has excess or extra cash in circulation. Suppose a government decides to expand the money supply by printing more money, what would individuals do with the money if it is given to them?
The following alternatives will be available to respond to this situation:
1. People will purchase commodities and services (capital goods (property)) and investments (mutual funds, shares, etc). Some funds may be used to repay debts such as credit card payments and mortgages. However, the majority of the funds will be spent.
2. Put the money aside for later use.
3. Donate the amount to someone needier than the person himself (this is not true if everyone has enough money from somewhere else). Even in this instance, the person to whom one will donate will finally choose one of the above two options.
So, there are just two likely possibilities: either you buy something or you save it for later. But most of the money will be spent. A person who has been working for a living would lose focus from working and earning because he now has a lot of money to spend (he will become uncomfortable about his purpose/motivation towards work – because his primary goal of working was to gain money that he now has). This will cause an imbalance in the country’s demand and supply equation.
What will happen if every person on the planet has a huge sum of money in their bank account? Will they continue to work? If yes, then who will produce and for what reason will they produce? Even if some people continue to do their jobs of producing/delivering goods and services for the country, this will result in a drop in production and, as a result, a shortage of supply.
On the other hand, with the increase in currency, demand for each of these goods and services rises, and even if we maintain the same level of production or supply (or even no production or supply), the price rises substantially. Even if we try to increase supply, we will need more money because prices for everything has risen, including raw materials, manpower, and equipment. And it is in this manner that the economy will finally enter the position known as “Hyperinflation.”
That is why countries that printed more money than was required have experienced adverse difficulties. Take the instance of Zimbabwe, for example. Something extraordinary happened in Zimbabwe in 2008, following the financial crisis. In November 2008, the African country’s inflation rate soared to a staggering 79,600,000,000%. It didn’t happen overnight. It actually began under Robert Mugabe’s presidency of Zimbabwe in the 1990s. He wanted money for political reasons. Mugabe did this by printing as much money as he wished, money that eventually made its way into the financial system and that is where the problem originated! It is never a beneficial move to expand the money supply in the economy without increasing the amount of goods and services produced. As you have more money chasing the same quantity of products and services, inflation rises drastically.
So, to become wealthier, a country must produce and sell more goods and services. This allows more money to be printed safely, allowing customers to purchase those extra items. This is how a government determines the amount of currency that will be printed and circulated in the economy.
Important considerations while printing additional currencies:
 Gross Domestic Product (GDP): GDP is the total worth of products and services generated within a country’s geographic limits over a given time period, usually a year. The GDP growth rate is a key indicator of a country’s economic performance. One of the most important factors influencing the amount of money to be printed in the economy is GDP. The government prints money of the same value as the value it has garnered in its economy, or GDP. The result is increased economic productivity – GDP boosts the value of money in circulation, as each unit of currency may be exchanged for more valuable goods and services. It’s worth emphasising that the government provides individuals with the same amount of actual currency as a medium of exchange as the value it receives from GDP and inflation.
 Inflation: Inflation is defined as an increase in the price of goods and services over a period of time, as previously stated. It’s a financial term that suggests you’ll have to pay more for a carton of milk or a haircut.
 Banknote that has been soiled and tampered with: Soiled and mutilated banknotes that are no longer fit for circulation are withdrawn from circulation after being properly recorded in the central bank records. These are then burned under the tight supervision and attention of the concerned authorities. Only then a government can plan for the printing of fresh banknotes to replace the burned currency notes.
The appropriate department of government comes up with an estimate of currency required after checking inflation, GDP, and clearance of old notes.
For the sake of brevity, to conclude it here that raising the money supply excessively is not a smart idea for the economy.

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Shahid Tariq Lone