Why Can’t We Just Pay for Everything by Printing More Money?

Sometimes, even an extremely dumb question can be worth answering because it’s a great way to get to a deeper, more important truth.

With that in mind, how many times have you heard someone say, “Why can’t we just print money to pay for whatever we want?”

You might say, “No one could really believe that, could they?” But, in fact, they do. There’s a whole school of economics that basically pushes this idea called Modern Monetary Theory. Modern Monetary Theory is admittedly unpopular because it’s quite obviously stupid, but it has still drawn attention from some very prominent liberal politicians like AOC:

All this came to mind because of a tweet on X:

What she says is, “All I’m saying is I’ve never seen a valid argument explaining why we can’t just print more money.” The video goes on to mock her for this but doesn’t explain why it’s foolish.

However, I am going to take the time to explain it, and I’m going to start that process by showing you this coupon:

First of all, this is a coupon for a free car. What is it worth? By the way, that’s not a trick question. I am asking you what this image you are looking at would be worth if you printed it out on your home computer.

The answer would be pretty close to zero, although you could argue it’s perhaps worth some fraction of a penny because you could scribble notes on it.

Yet, this says, “One Free Car!” and a car is worth far more than a fraction of a penny. I was looking at cars yesterday. A new Toyota Camry? It starts at S29,300. A new Cybertruck? $69,900. A BMW M4 Coupe? $82,000.

So, why is this coupon for a free car not worth that much? Because it’s not the actual car, it’s just a piece of paper that says you get a car with no one guaranteeing that transaction.

Similarly, what is a hundred-dollar bill worth? It’s not $100 worth of goods or services; it’s just a piece of paper representing $100 worth of goods and services.

Well, if that’s true, when does the coupon become valuable? When someone says, “I’m going to give you a car in exchange for that coupon,” and backs it up. Suddenly, that coupon has real value. If, let’s say, that coupon really got you a Cybertruck, someone might suddenly be willing to pay you a very large amount of money for that coupon since they could trade it in for a vehicle.

Similarly, when do the dollars in your wallet start to become valuable? When they actually represent something of value, like gold.

For example, from 1879 to 1933 in the United States, you could literally exchange a dollar bill for gold held by the government. Eventually, the government stopped doing that, but from 1944 to 1971, foreign governments could still trade dollars for gold.

In other words, dollars were representations of value that were backed by real value, which was gold. We don’t know the exact date, but probably until some point in the 1950s or 1960s, the federal government literally had enough gold to match the value of all the dollars it had released to the public.

That’s how it’s supposed to work.

So, what happens when it doesn’t work that way? What happens when people say, “Why don’t we just print more money?”

This is a complicated question, but let’s explain the basics.

What do you think would happen if the actual VALUE of something like a pizza stayed the same, but the number of REPRESENTATIONS OF VALUE that were used to pay for it were doubled?

If you’re wondering why everything got radically more expensive after COVID, this concept explains it. There are estimates that the money supply increased as much as 80% during COVID, but most sources I’m finding today seem to agree that the real number was closer to 40%, which is still a huge increase. So, what happened as a result of that? Inflation. The cost of everything SURGED. You can see it in the cost of cars, houses, rent, electricity, groceries – pretty much everything went up a lot in a hurry.

Why?

Because that’s what happens when we print more money. You end up with a lot more dollars representing the same amount of value, so practically by default, dollars have to represent less value in the real world.

How bad can it get? Really, really bad. Here’s a famous picture from Weimar Germany in 1923 that gives you an idea of how bad that is:

Once you start to understand this, you start to understand why our massive debt is going to economically doom us all down the road. It’s because paying the US debt off is functionally impossible at this point, UNLESS the value of the dollar radically decreases. If inflation rises so that a trillion dollars in today’s money is only worth a billion dollars tomorrow, paying off the debt becomes trivial.

Of course, the downside of that would be that your savings would become nearly worthless, the salary you’d get paid would quickly fall far behind real-world prices, and meaningful amounts of cash would be extraordinarily hard to come by, which would crash the economy. Even many of the rich tend to struggle hard in a situation like that, while the middle class and poor quickly become paupers.

The more money we print, the closer we get to the day that becomes a reality for all of us. So, if anyone is wondering why we can’t just print as much money as we want, that is the actual reason why.

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