WHY CAN’T WE PRINT MORE MONEY? – Everything you need to know about money.

From being a kid to a and adult, a question may crossed into your minds that why can’t we print more and money?

Around the world, we have seen Central banks printing money so here is the question, we are told from a young age that we should study and work our whole life to earn it, then how all of this money suddenly come out of nowhere?

In this article I will answer few questions related to money, which are

How is money created?
Who is going to pay back?
What are the consequences of money decisions made until today?
What is wealth inequality?

Why can't we print more money? 

Everything you need to know about money

How money is created and what are the forms of money?

Note: This article has been written with the view of United States, though the current situation of money and its consequences are almost same in every other country. So no matter which country you are from chances are that you will very much relate to this article.

The first form of money is created by government in practice, and it is outsourced to the central bank to the Royal Mint but controlled by the government.

Physical money comes in two forms either paper money or coins. This physical money is a tiny fraction of the economy and in many economies this kind of money only makes up about 3-8% of the total money in the economy. This physical money is created in order to meet the obligations of cash in banks. When you go to an ATM to withdraw cash, banks need to make sure that they have enough cash in order to meet these obligations.

How much it costs to print physical money?

If you take 10 $ for example, it costs approximately 3 cents in order to print that money.

This means that approximately 9.97 $ of profit for creating a 10 $ note.

This  9.97 $ profit, can now be added as tax revenue which is called SEIGNIORAGE.

SEIGNIORAGE – profit made by a government by issuing currency, especially the difference between the face value of coins and their production costs

Since the government makes profit from minting coins and printing coins and notes and can reduce the amount of taxation on public. You might be thinking why don’t government just always print physical money?

Now the big question.

So why don’t we print more and more money?

The main reason why governments don’t print more money is because of the politicians.
As this could lead to a massive conflict of interests as there could rise an urge to keep printing more and more money for campaign promises or to fund wars. Then excessive printing of money would in theory destroy the currency as massive devaluation would occur.

What would be the consequences of printing excessive money?

The more money you have in circulation the less its worth would be and that’s a problem.

For example if a massive inflation takes place and an average person, David has a million dollars but that million dollars actually worth is only to buy an apple. Then in this case the worth of a million dollar has gone down. The loss of purchasing power at a time is called inflation and when inflation gets out of hand money becomes worthless.

Some recent examples of runaway inflation include countries like Argentina, Zimbabwe and Venezuela.

As inflation rates goes up people quickly loose faith in the currency. One time Venezuela people were making handbags out of physical notes and simply drawing pictures on it, because money had lost it’s value.

You can think of money as a measuring value stick, a measuring stick that is highly elastic and can change depending upon circumstances. For thousand of years Gold was a measuring stick of value, gold was kind of like an anchor keeping the money supply in check and the current government, responsible.

In 1971, President Richard Nixon of the United States announced that the United States would no longer convert dollars into gold at a fixed value. Since that point money the measuring stick of value became elastic.

Since the U.S dollars backs all other currencies as rescue currencies, Nixon’s decisions changed the world.


The vast amount of money created today is done by banking sector. In most developed countries, 97% of the entire money is created digitally by banks and therefore most money in the world is privatized. Banks invented digital money when they persuaded lawmakers after many early bank runs.

A bank run is an event when depositors want to take their money out all at once but the banks don’t have it.

With these events the banks argued that they should be allowed to create more deposits than actually exists, based upon debt, and this is how the government outsourced the creation of digital money.

The idea of using debts as money begins much earlier, the English innovators set the stage to become the creators of money across the globe. In 1704, the English Parliament passed the Promissory Notes Act.

A promissory note was given as a trust of token between the bank and the people that the bank would return the money later with the help of Promissory note. It read something like this we promise to pay the bearer xyz amount of money for the value received. Under the law that paper was as good as the amount that was mentioned in the paper. So banks were now authorized to be able to use the debt notes to circulate as money. From this point the banks were able to create and destroy debt themselves and hence money from the banks rented out as interest. The interest was the bank’s profit of creating fresh money.

In the modern world as you can see the whole world’s economy is based upon these promises.

Let’s have a look.


When you go to a bank to borrow some money the banking license gives the bank the ability to create money every time they issue a loan.  They do this through the double accounting system for example if you buy 100,000 $ house the banks create 100,000 $ in their account and then you have 100,000 $ as debt in your account.

That is done with the promise to pay it back with an interest.

This 100,000 $ debt can enter the wider economic system because when you purchase the house the owner of the house can use this fresh debt that was first created in the bank.


They debt received from you is used to buy other things in the economy. This means in our current system if we want to have more growth we need more debt, the key point here is more debt means more money. Just from a different point  of view.


To the lender it is an asset, to the borrower it’s a liability.
But they are all same in a way.

All you need to know is that when a bank issues a loan it’s not somebody else’s savings its not the monthly the bank had, it’s essentially brand new money that the bank created.

They simply type it into a computer and it appears as a digital representation of government’s money which you can spend.

The beneficiary of this brand new money is actually the bank because they get to charge interest on that money and that’s how they make profit.

Later when you pay this loan, the debt disappears as well as the money disappears but the bank’s profit from the interest remain the same.

The real estate and the property markets are the largest tools for creating digital money this is because the banks have decided that it is the most safest and profitable form of creating debt because if you can’t repay the loan the banks can simply take your house.

In developed nations, vast amount of money is backed by the mortgage market. Mostly for decades the banks have abandoned investments into the wider economy and have shifted their focus to investments in housing this has pushed up the housing prices as people take on more debts to buy houses they otherwise couldn’t afford but the banks make more money due to interest rates.

This cycle over many decades has caused one of the biggest property bubbles on the planet.

From this I can say that now we are addicted to debts.

How banks gamble with your money ?

So up to this was all about loans, but what about deposits ?

Deposit – we need to pause a cash into a bank you are no longer the legal owner of that money, now the banks are.

Banks keep 10% of your deposit on reserve and can loan out 90% of that money to someone else and that other person can deposit the money into another bank.
Then that bank can loan 90% and so on!

This is known as Fractional Reserve Lending.

When all is said and done an initial deposit of 100$ (with a 10% reserve requirement) can ultimately lead to a 100 $ in total money circulation.

Well that was how it was used to work until 26th March 2020, there is now a zero percent reserve requirement. According to the Federal Reserve quote, this action eliminated reserve requirements for all depository institutions.  

So banks can now create infinite amount of money with no reserve and it doesn’t stop here, when banks hold their deposits they, along with hedge funds, gamble with it through investments in financial instruments such as derivatives and securities, they do this in order to make high returns.

Most of the time these instruments are just bets. If the price of an asset will rise or fall but when taken to the extreme this can get ridiculous.

The problem today is that the banks are playing with so much derivatives stacked on top of each other with leverage multiplying factors that actually nobody knows how much money is tied up in this gambling.

Some estimates put the derivatives market at over


This is over 10 times the global economy.


In booms everyone takes on debt that is loans from a bank and then they spend it on things that they normally couldn’t afford but this causes economic growth.

Eventually people can’t  afford to take more debt and can’t pay it back, the banks stop lending and default start to take place and the economy takes a downturn.

This is natural and has happened over centuries but in 2008, everything changed the world didn’t want to go through a pain of downturn and some analyst mark this as the very point that the real economy died.

In 2008, the banks had become so large intertwined and integral to the supply of money such that when they are about to collapse the government had to use the central bank’s to bail them out.

Remember the banks are creating 97% of all money as DEBT and if this can’t be paid back this can lead to system failure, a risk of collapse of the  entire global monetary system.

Since 2008, the economy was dead and has been on life support ever since then. A decade of hyper low interest rates which basically made the cost of borrowing money free, have caused market distortions so large that has compounded the entire problem.

There were short term gains for the consequences of long term pain. When private banks make risky bets and incur losses central bank can rescue them with their infinite wallets.

According to an interview, FED chairman Jerome Powell was asked about why they have flooded the system with money then he quoted

“Yes, we print it, we print it digitally, as Central Banks we have the ability to create money digitally and we do that by buying treasury bills or bonds or other government guaranteed securities and that actually increases the money supply”.

by FED chairman Jerome Powell

But by law, Federal Reserve can only lend money that must be paid back.

As you see we have to payback all of money ( debts),
all of this money that is being created is like that promissory note with promises to pay it back.

Except it is signed by all of us and we signed that we are going to pay it back through taxation by us and our future generations.

It’s important to note that it’s not the government who supports people it’s the people who support the government through taxation. 

Taxation and trade are the two major ways that government can raise money, this raised money is used to pay back central bank loans with interest.

So when governments use central bank’s to bail out private banks for their risky behavior then the people are left with a debt which eventually has to be paid by the taxpayers in future.


The third form of money is QUANTITATIVE EASING, it was a new form of money that was created by the Japanese Central banks in 1989. It was later made popularized by the Federal Reserve during the 2008 crisis.

QAE is where a Central bank creates money in order to issues loans directly to the banking sector, large corporations and most recently to the public.

It’s a way of flooding money into the economy at times of extreme events like the financial crisis of 2008 as result of this the central bank’s balance sheet have gone completely out of control in order to prop the economy a little bit longer

In 2008 during the crisis and the first time this was tried outside of Japan, the 700 billion dollar of QE was very controversial.

It was thought to be one of the emergency scenarios but over the next decade the federal reserve was unable to reverse it

To give an idea of how significant all of this was it took from the foundation of America in 1776, all the way upto 2008 (around 200+ years) for the nation to attain less than a trillion dollars in debt.

By 2014 that number had expanded to 4.4 trillion and since the onset of the pandemic in 2020, 3 trillion was added in span of three months.

Now the US Central banks is now creating hundreds of billions of dollars in just few hours. It’s seeming to have less of an effect as it continues.

So how does this money enter into the system?

The central banks use their magic money to buy the equivalent amount of bonds from the government.
They do this through bond markets which exists to lend money to corporations or governments.

Although the stock market gets more press the bond market is actually bigger.

So, what is a bond?

It’s basically the same as debt but it is issued by the government or corporation. Central banks which have no savings can create money to buy these bonds.

Can a central bank go bankrupt ?

Well according to the European Central Bank, (ECB) which published a paper in 2016, central banks are protected from insolvency due to their ability to create more money.

If you think this sounds as a bit unfair, have patience, governments are stuck between a rock and a hard place, they can’t raise money except for raising taxes but owed trillions to central banks.

The hope is the borrowed money can kick start the economy but something else is happening!


When central banks buy bonds given by the government or corporations they can end up owning a lot of world’s assets for example the balance sheet of the Japanese Central bank is bigger than the entire GDP of Japan , they own 80% of the stock market. The central bank of Japan is the stock market’s largest share holder.

The Swiss central bank own 90$ billion in American stocks including Apple, Microsoft, Google and Amazon.

So these central banks are creating money out of nothing and they can’t go bankrupt but yet they are buying real assets, even a toddler can see that something is wrong here! It turns out they are creating money out of nothing and buying things that does have some consequences. These type of Central bank interventions remove stock markets from reality.

Throughout the 20th Century the stock market actually used to reflect the economy but recently that’s gone completely out of the whack.

The US stock market has almost become twice as big as the entire nation’s GDP  which literally makes no sense. Central bank intervention is the main reason why in April 2020, 13 million people became bankrupt in United states but the stock market had it’s best month.

Since 1987, the central bank and hedge funds printed trillions and gave it to the banks and hedge funds with almost zero percent interest rates, this money made it straight to the stock market while the real economy rarely got any help.

Earlier in this article, I have discussed that printing more money would lead to inflation like situation.

So why we haven’t seen an inflation yet ?

The answer is Yes, we have seen inflation in housing prices and stock markets. The printed money ends up in all of these assets pushing up the so the few people who own large amounts of stocks end up ridiculously wealthy while there’s no growth in real economy.

The rich get richer and the poorer get poor.

A lot of people can see and feel the wealth inequality but they have no idea where it’s coming from.

When Central banks print money, the first recipients of the newly printed money enjoy high standards of living at the expense of later recipients of money when inflation had already taken hold. This phenomena is known as the CANTILON EFFECT.

Experts believe when the rich finally start selling their stocks and real estate so as to buy other assets in times of distress, the money velocity which is the rate at which the money changes hands in the economy will start to pick up and that is when we will start seeing real inflation in the general economy.

Click this to read more about inflation and how it effects our savings.

So what do we do?

It’s clear that people out there who have lost their jobs need help though just printing money is only the band aid, I think.

The real solution was in the past, decades ago , societies and nations should have focused on wealth creation instead of excessive housing financialization and gambling. Banks should have made loans to productive areas of society. Small and medium businesses, entrepreneurs education, manufacturing, research and development all of these kind of things.

Just imagine how our world would be if the banks invested in these kind of things instead or property or gambling. If price of something goes up and down, it’s riskier for the banks but the benefits lead to more jobs, more innovation and more better living standards in the long run.

Also government can collect more taxes from taxes from these incomes without necessarily raising extra taxes. These extra taxes from generally higher living standards can then be spent on social programs to help those who are truly in need.

You can print money but you can’t print wealth.

But focusing on wealth creation and productivity takes time effort and hard work and it just seems that people don’t have appetite for that. Frankly it’s too late for this option if we focused on funding  wealth creation before this pandemic had hit us, all of our economies would be much less fragile .Most individuals and businesses would have healthy amount of savings to survive like in the 20th century.

But now we have to deal with the consequences of a fragile system

What’s going to happen next?

In my personal view, I think it is going to be very unpleasant over the next decade and it may involve massive amount of inflation and slow economic growth. A situation like this known as stagflation has happened in the 1970s but this time it could be much worse due to excessive amounts of debts with added effect of social instability.

Theories on the future

The mainstream view is that eventually the world will loose faith in the US dollar though the some macro economists think that the American dollar may actually rise in value as other nations would try to sell their goods for exchange of falling currencies for the US dollar because it’s the cleanest economy out of the worlds falling economies. This is called as the DOLLAR MILKSHAKE THEORY.

Some people think that digital stable coins would be able to solve the problems. There are others who argue that nations can print infinite amounts of money just as long as they keep producing enough goods to pay the interest on the debt that government owes the central banks.

The argument here is that the debt actually never has to be never paid back only the interest, this is called the Modern monetary theory. Anyone can’t possibly say this would work or not because it has never been tried before but this too seems like another fragile solution.

Small communities in Venezuela and small town in Italy have taken power back in their control where they just have issued their own currency

All in all, who knows what’s going to work and what’s not.

On the bright side, this could spawn a massive reform, as out of the worst circumstances the best innovations arise.

The way money is created and the overall banking system seems like madness and people have started to notice that the system is no longer working.

The monetary system is so ingrained and so persuasive and it becomes invisible to see nobody ever questioned when things started going wrong they pointed out things that were visible. Things that look like problems, surface issues which you could see and understand looking at the surface some would point the finger at capitalism but you have to dig deeper and deeper and when you do you can see it’s unfortunate and untimely mix of the debt based system, extreme financialization and a rampant Cantillon effect that is causing extreme fragility and ever increasing amount of massive wealth inequality.


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