"Ed Huntress" wrote in message
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"Adam Corolla" wrote in message
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snip


Money is probably the most desired thing there is, because it can be
exchanged for just about anything. So, the varying factor in its value
will be how easy it is to get.

If all the tree leaves and blades of grass became various denominations
of money, then money would be worthless. Not because there's more OF it,
but because it's easy to get. If the government printed five hundred
trillion dollars tomorrow and sealed it all away so no one could get to
it, the value of money wouldn't change even there's a hell of a lot more
of it because it's no easier to obtain. Do you agree?

Now, do you see where I'm going with this? When the government prints
additional money, how does that extra money make it easier to obtain a
given amount of it? Let's say the government opened the vault with the
500 trillion in it and did with it whatever they do with all the extra
money they print (which is what? I don't know.) How does that extra
money make money easier to obtain? Do all companies suddenly give raises
when they find out there's more money in the economy, so that money
becomes easier to obtain? I think the key here is in finding out what
the government does with the extra money. I'll be grateful to anyone who
can explain that to me.

Printed dollars are only a small portion of the "money" that's available
in the economy. Most of it is in the form of demand deposits -- ciphers on
a page, or, today, bits in a computer. The cash is just based on a
calculation of how much of that "money" is needed to keep the wheels of
commerce greased.

That makes a lot more sense to me than the simplistic belief that inflation
is caused by the government printing too much money.


The story of money is a confusing and tricky one.

I agree, but the particular questions I'm asking are not very complex at
all:

What does the government do with the extra money they print?

Is there a particular mechanism (or example of a mechanism) through which
printing more money directly causes the value of each monetary unit to drop?

It shouldn't take more than a few sentences to answer these questions for
the most part.

There are good explanations written for college students of economics, and
others written for laymen. One of the most enjoyable of the latter is John
Kenneth Galbraith's _Money: Whence it Came, Where it Went_, but there are
newer ones that probably are more to the point. He takes you by way of the
Babylonians and ancient Greece to get to Wall Street. g

--
Ed Huntress

That actually sounds somewhat interesting. However, can you answer the
particular question of what the feds do with the extra money they print--how
it gets into circulation?