🪙Why the Government can't produce more money?

Understanding why the Government in poorer countries can't produce more money in order to maintain economic stability.

Have you wondered who prints all of your money in India? Obviously, it's the Reserve bank of India (RBI) which is run by the government. So, the next evident question is if the government prints the money, why can't the government print more money and make India a wealthy nation?

The answer is No. Why? In short, excess money printing leads to inflation and poverty.

But how come excess money leads to poverty? Let's understand it better with an example.

For instance, a packet of milk costs 20 INR and for a family of four, two packets of milk would suffice for their daily needs. But due to budget constraints and salary shortage, the family of four can afford only one packet of milk since their monthly budget can hold space for spending only 20 INR/day for milk. Suppose, the family gets more disposable income and they decide to buy one more packet of milk every day, as they are more equipped to spend 40/day on milk. So what happens? The milk-producing factory should produce one more packet extra to meet the demand. This is simple now as it didn't get complicated for an extra one packet of milk.

What if all the families in India get more disposable income and decide to buy an extra one packet from their usual. The milk industries would fumble to meet the sudden increase in the demand and obviously by the demand-supply-cost theory, when demand increases, the cost of a commodity increase. So the milk industries would raise the price of one packet from 20 to 25 INR and this 25% increase in the price would be a bane for the lower class families and they can't even afford a single packet of milk which eventually leads to poverty.

More money → More desire to buy goods → More demand for goods → Demand Increases → Cost of a product increases.

How money is created?

Thus, excess money printing leads to asset price inflation. This money flows into "assets" like Stocks, Cryptos, Real Estate, and Gold.

If I borrow money from you do I pay taxes on debt? No. Why is that? Why is debt tax-free? Because that’s how money is created. And so the banks love this concept. They love people borrowing a lot of money. So how to get rich? Borrow money and buy assets with it. The poor person borrows money and buys liabilities like cars, houses, appliances and they get poorer and poorer.

In fact, countries like Zimbabwe and Venezuela had tried printing more money to try to make their economies grow and eventually ended up in "Hyperinflation". To give some context about what hyperinflation is - when Zimbabwe was hit by hyperinflation in 2008, the prices of a commodity rose by 231,000,000% in a year, which means if you buy chocolate at 1$ at the start of the year, the same chocolate would cost 231,000,000$ (231 Million) at the end of the year. That's how Zimbabwe ended up in poverty.

How to get rich then?

Well, the answer is simple. A nation has to make and sell more things (goods and services) which means the country should not increase the demand for a product. This makes it safe to print more money so that people can buy more things with their exposable income.