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Old 11-11-2005, 07:54 AM
Sully Sully is offline
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Join Date: Apr 2004
Posts: 8
Default Re: Are we done with the pennies yet?

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Clearly I'm not an economist, but if something cost me less to produce than I could sell it for, I'm pretty sure I'd be churning them out as fast as possible. I realize that if I churn out way too many somethings, my somethings will be worth less, but if there is current demand, then I'm going to keep producing them.

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As for shoes or cars or widgets, you are right. As long as your profit margin per unit is still there, you can produce an infinite amount and still make money. This works for everything EXCEPT money.

Any time a country prints more money without removing the equivalent amount from circulation (all other things being equal), they have devalued their currency. This weakens their entire financial balance, and therefore power.

Do this enough, and your country becomes impoverished. Many, many countries have done exactly this, and paid the price. Ask your friends down in Central America how the 80's went.

*****Another disclaimer for generalization presented as fact..I don't remember specifically when inflation was at it's worst for them, but I know they went through some [censored] a while ago (maybe still today), and a good part of it was a result of bad Federal Reserve policies.*****

Look up inflation.
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