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Why Can鈥檛 Governments Print an Unlimited Amount of Money? | Money & Currency System I Nitish Rajput - YouTube
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What is the reason that the government is not ending poverty by printing notes?
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The gold reserve of the US was touching the sky
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80% of the gold was with the US. On the other hand, other countries were in debt
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Why is the value of some countries more and some countries less?
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Who decides this?
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During this time, maximum gold reached the US
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But gradually all the countries tried their best of their capacity to improve their economy
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In 1947, one dollar was equal to one rupee.
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On today's date, it is equal to 76 Rs
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So why did this happen? Countries are trading in US dollars in place of gold
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Why in US dollars and not in other currencies?
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When demonetization was done, the government took its promise back
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from 500 and 1000 Rs notes.
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The government can print how much soever currency
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Then what is the reason behind the government not ending poverty by printing notes?
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One dollar is equal to 76 Rs.
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Who is deciding this?
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And if someone's deciding
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then why are we agreeing to this?
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And what happened in history that all the countries
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agreed to make the US dollar a global currency
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And the most important thing
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what situation arose that
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a piece of paper coming from the bark of a tree
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People are working 8 to 9 hours for this in shops and offices
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The answer to all these questions lies
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only in one thing, what is money?
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And how did it evolve? When you have to sell a second-hand thing
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Then how will you decide its price? Assume you have an old mobile
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And you will sell it for 100 Rs.
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And thousands of people will come to your doorstep to buy that mobile
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Then what will you do in that case?
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You will set the price of that mobile as 500 Rs.
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After that also, if 100 people are ready to purchase it
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Then you will keep increasing the price.
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You will increase it until one person is ready to purchase
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at the given price.
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In the same way all over the world
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prices of all the products are decided
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It is named demand and supply.
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When you go to a fruit shop and see that the price of an apple
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is more and the rate of bananas is less. This doesn't mean that its color is
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very nice. Its meaning is very simple
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that its demand is more than the supply. You may hear that the price of onions has risen.
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Its meaning is that the demand for onions has increased and the person who is
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setting the price is doing the same thing as we have done with the second-hand mobile.
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A company has manufactured 100 cars and set the price as 1 lakh Rs.
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Those who have money will buy the car
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And those who don't have money will work by bike or cycle
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One day suddenly the government prints a huge amount of money
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and distribute among the people.
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People will also have money and the market will also have money
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As 100 people came to buy a car, this time it will be 1000 people
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More people will come to buy a car this time.
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The person who is manufacturing a car will do the same thing that we have done
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with the second-hand mobile. He will increase the price until 100 people will be left to
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buy a car. Once Zimbabwe has also done the same thing
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in order to improve the economy
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It started to distribute the currency among the people. Their economy worsens
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instead of improving. People used to go to buy a loaf of bread with loads of money
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Children used to go this way to buy chocolate. So only inflation will increase
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with the government printing notes. It benefits only when the resources and services increase.
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And when the government keeps printing notes then only inflation will increase
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And it's not like the prices of one thing increase and inflation will increase
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When the prices of overall goods increases, then the inflation increases
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If you see it then your kept money decreases when the inflation increases
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If the inflation is 5%
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then it means that the thing which you are getting at 100 Rs
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Maybe its price was 95 Rs earlier.
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If you pick the historic data then you will get a clear picture
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of how inflation has emptied the pockets of people.
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Let's come back to the topic.
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Everything comes back to demand and supply in finance
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But it is very important to understand
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that what is money?
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You will understand everything with just one concept
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If you see all over the world, why does anyone give you money
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Anyone will give you money only when you give them value or do their work
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You get salary in office only when you do their work or gives them value
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Shopkeepers also get money only when they give you products in exchange
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So in a way, money is equal to the value
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Money is represented by different things from time to time.
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In earlier times, people used to get their work done by giving food grains
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Gradually people started to show the interest
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in things that don't get damaged for a long time
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or whose value is more like gold.
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But traveling with gold, adulteration with gold
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and maintaining its security is very inconvenient.
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The government has given an option where you don't have to carry your gold
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Deposit the gold with the government
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The government will take care of its security. You will get a receipt in exchange
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which is also called a promissory note. And you can trade based on that receipt.
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You don't have to roam around with gold
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The receipt was converted into paper money eventually.
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In reality, this paper money doesn't have its own value
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This is just a piece of paper.
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The value of this money increases
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when the government promises you
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that you will go anywhere in India with this and
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you will get the exact same amount that is written on it. This is the difference between normal
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paper and currency. The governor of India promises you by signing that
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I am promising to give this much money to the bearer. And this promise has a value that
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everyone trusts this. When demonetization happened, the government took back
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the promise from 500 and 1000 notes. And as soon as it took its promise back
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The notes of 500 and 1000 became paper. People started to trade in paper currency
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with the promise of the government. But when we want to trade outside the country
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Then what will happen in this case? When US and India will trade
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Then on what thing, the trade will be done? You are going to purchase something from the US
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And you will say that this is a red-colored note and we call it rupees And we are giving
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you a promise. Then why will they agree to that? And why will we take their dollar?
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And assume in some situation that we took their currency
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Then what will we do with the currency?
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Money becomes money when there is its acceptance
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Every country faces the same problem that there were no currency that is trusted
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by every country. Assume you brought the US dollar after trading with the US.
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Now you are required to trade with Russia.
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Now Russia is saying that it will not take US dollar
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In this case, what happened is that the US dollar is beneficial only in trading with the US.
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Because there was no currency that was trusted by every country
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The medical store in your area is asking for another currency groceries store will ask
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for another currency. You will have to earn in every currency in this manner
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But one thing was good at that time, every country trusted gold and silver
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But it was not that easy to carry this much gold and silver for trading.
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To solve this, Gold Standard was brought.
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In this, the currency of the country was attached to gold.
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What is the meaning of attached? It is a hypothetical situation
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Assume India has announced the value of 1 gram
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is 20 Rs.
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If someone will bring 20 Rs then he will get 1 gram of gold in exchange for that.
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And if someone will bring 1 gram of gold then
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he will get 20 Rs in exchange for it.
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In the same way, the US also announced that the value of 1 gram of gold will be 2 dollars.
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This means 2 dollars will be equal to 1 gram of gold.
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And 20 Rs will be equal to 1 gram of gold.
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So 2 dollars automatically became equal to 20 Rs. If we want to calculate the value of 1 dollar
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Then it will be equal to 10 Rs. After that, when both the countries went for trading
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then they didn't have any problem with each other's currency Because both the countries
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knew that the currency coming after trading can be converted into gold anytime.
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But it shouldn't be like the currency that we are collecting after trading
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When we go to convert the currency into gold
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then that country does not have gold.
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So the rule was made that a country can print the same amount of notes as gold.
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So that if a country wants to get the gold after giving the currency then that
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the country will be in the position to give the gold. And the company started trading by doing this
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The trade was done with gold and the currency was medium.
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Now you'll say that the gold standard system was right why was it removed?
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And if it was removed then why the dollar was made the base. When world war I
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started then the countries had to buy the weapons in bulk to save their existence
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And the crisis was that big
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the countries started to buy weapons in exchange on the basis of gold currencies
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Gradually the gold started shifting to the US
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because the US was the main exporter of weapons. The madness of fighting a war
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ended the money and gold country by country.
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When world war first ended
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the countries were suffering from an economic crisis. And when the countries
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don't have gold, the base of the trade then how will the countries trade and how will the
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currencies get printed. During this time, the maximum gold
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reached the US. The countries were trying slowly to
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maintain their economy with their best capacity. Till then world war second started
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This was the most expensive war in history.
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The countries were in massive debt this time.
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The US exported a huge amount of weapons. The gold reserve of the US was touching the sky
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80% of the world's gold was with the US.
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On the other hand, other countries were in debt.
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In these cases, trading done by attaching the gold with the currency
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was not possible because countries used to trade by printing notes on behalf of gold
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So if they don't have gold how will the trade be done?
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And when there is no trade, then how a country will earn?
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Countries did a meeting for this in 1944 which is called Bretton Wood Conference
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In this meeting, two organizations called IMF and IBRD are made
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The work of IBRD was to help the countries which are destroyed in the war,
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Rebuild them and stabilize their economy
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It is known as the World Bank on today's date.
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The purpose of the IMF is to facilitate trade between countries.
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Even today if a country gets stuck economically then these two organizations support them.
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It was decided in this meeting that the countries don't have gold
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then the countries can trade in US Dollars. Why US dollars and not in other currencies?
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The US was the only nation that had this much gold it can
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circulate the gold of the US value all over the world.
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And on the same day, the US also announced
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Anyone can take the gold by bringing US dollars to us or can take the US dollar by bringing gold.
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And one ounce of gold was valued at 35 dollars.
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Every country is good at one or other resources then it can increase the reserves of dollars
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By trading with the US. And having the reserves of dollars is equal to having gold reserves.
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which can be converted by a country at any time. It has become a way of trading
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And with that improving the economy. The US has become a reserve currency of every country
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Every country has dollar reserves.
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And it started acting as a global currency
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Vietnam war started with the US and the US economy dipped
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The US printed more dollars in comparison to the dollar-gold reserve
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On the other hand, the economy of other countries also got better
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In 1965, Charles de Gaulle, president of France
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sent his navy
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And gave the dollar to the US
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and brought back the gold with the ship
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Slowly, the other countries also started to follow the same thing.
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America printed more notes in comparison to gold value.
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which were roaming around the world and the gold reserve of the US was decreasing
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fastly and it's the economy was also falling. In 1971, US president, Richard Nixon removed
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the dollar-linked with gold. This means the gold cannot be converted into a dollar
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and dollar with gold. This is also called Nixon Shock. It was a very big shock for the world.
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But the reserves of all the countries were in the dollar
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It became a compulsion for the country to trade in dollars. The dollar emerged as a global currency
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The thing is, why do some currency values be less and some more?
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Who decides this? In 1947, one dollar was equal to one rupee.
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On today's date, it is equal to 76 rupees. So why did this happen?
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This depends on demand and supply. Every country has its own currency
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If you want to take goods or services from any country
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Then you have to buy it in the currency of that particular country.
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When you visit that country then you change your currency from the exchange
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After that, you will be able to purchase something. In Fact when you purchase
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the products of Europe or the US online then first you've to buy Euro and dollar
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Then you have to give the Indian rupee in return which is called an exchange.
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Then you can purchase anything. You don't get to know these things because
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the bank does this on your behalf. So the country which produces more valuable goods
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Whose services and resources are in demand in other countries.
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The value of the currency of that country is more. And the other countries due to
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their need to purchase that country's currency by giving their currency
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This means that the demand of
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that particular country has increased.
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And when the demand increases then the rate of that currency increases.
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If a packet of bread in India is for Rs 10
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And the same brand of bread packet is 20$ in the US
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And we want to calculate the exchange rate
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Then a very simple way is that we will do 10/20
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These exchanges also have types. The example of bread that I've told you is called
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a floating exchange where the rate is changed on the basis of demand and supply.
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The second is fixed exchange. Some countries fix the exchange rates among themselves
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Like the rate is fixed between Saudi and US.
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1 dollar= 3.75 Saudi Riyal
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This doesn't have anything to do with demand and supply
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The third is managed exchange.
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There is a range in this.
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Assume you have set the range from 3 to 5
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The rate will change on the basis of demand and supply but it will not
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go below 3 and above 5.
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