We know that government shouldn't just print money, because it's gonna be bad. Bad what if to do it in a small scale, just a little, for example to hire some scientist (probably nothing gonna happen because of printed salary for just one or three men) or get one oil tanker (to get a little of oil)? And it both those cases it looks like a good investment that will return money.

  • $\begingroup$ This is generally how it starts.... and then next thing you know they're just printing money to pay all government employees and it keeps going downhill from there. If "this is a bad idea" doesn't stop you the first time because "it's just a little" it won't stop you the next time when it's slightly more. $\endgroup$
    – xyious
    Oct 30 '19 at 15:48
We know that government shouldn't just print money

I partly disagree. The government (or, well, the central bank) should print the amount of money that is needed to keep the inflation stable. Anything above that shouldn't be done.

Bad what if to do it in a small scale, just a little

What if you stole something small from a nearby shop, just a little?

What if you took advantage of insider information, just a little?

What if you committed a small accounting fraud, just a little?

Printing money increases the monetary supply. That leads to inflation, which leads to increased inflation expectations. The increased inflation expectations raise the nominal interest rates.

Those who have net debt will benefit (if it's fixed rate), those who have financed the debt of others by depositing money into bank will suffer (if they are fixed rate deposits). The suffering will be greater than the benefit, because of the unpredictability of inflation (if the government is free to print money, you never know how large the inflation is going to be).

Generally, governments are in debt (and they should be because it offers investors the ability to invest into government bonds, which are a core part of a stable investment portfolio) and the debt is fixed rate. Thus, the people having the government bonds will suffer. Essentially, printing money steals from the government bond holders.

Those who have real assets like real estate, forest or non-financial stocks will not see any effect (expect perhaps by taxation because capital gains are typically fully taxed even if they occur in times of increased inflation).

Note the government will eventually suffer as well. The unpredictable inflation means government bonds have a higher yield, meaning if the government is going to finance most of its operations by obtaining debt from the public (even though printing money for the rest of its operations), the interest rates will rise. So, printing money is a bad strategy, even in a small scale. Soon there will be no other way of funding the government operations apart from printing even more money, which leads to hyperinflation.


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