Why Can't We Print Our Way Out of the National Debt?

The more money printed, the more the dollar value plummets. In a word: Inflation

People who are not well-versed with the ins and outs of the national economy, sometimes ask "Why can't the US government just print enough money to pay off the national debt?" These individuals are also likely to not understand how money finds its way into circulation, after it is printed.

The Federal Reserve is in charge of managing the money supply in the United States, which includes paper bills and coins that find their way into your pocket. The Federal Reserve System allows all national banks to fully fill their vaults and ATMs. Smaller community banks get funding from larger national banks.

However, it is worth noting that there are other cash equivalents in the US money supply, and the Fed has also used them to inject liquidity. The Federal Reserve employed two techniques during the epidemic: open market operations and quantitative easing.

Open market operations: The US government lowered interest rates to their lowest levels and provided trillions of dollars in support for lenders, company owners, and homeowners through stimulus checks and industry bailout payments.

Quantitative easing: That's when the Federal Reserve sells government bonds in the open market, pulling cash reserves from its account and transferring it to commercial banks like the one you use, making it cheaper and easier to obtain loans. The Fed is currently reducing these purchases.

We must first look to history in order to answer the question why we can't increase the money supply to cover the national debt. Since 1933, US currency has only been backed by the government's good reputation (which is why we call it fiat cash). In other words, because we all agree that the US dollar has value, it does. The US dollar was previously backed by gold, which has some inherent value. We may produce more bills at a low cost in theory, therefore it makes sense that we would be able to print them en masse. In reality, it's really expensive: specifically, inflation.

Dealing with the US debt—which is currently at $29 trillion—would necessitate a significant boost in the money supply, which would severely depreciate your money. And if the dollar's value falls, you'll experience wacky-level price inflation, making today's 6.8% annual growth rate look tiny.

Furthermore, the Fed is in charge of how much money enters the economy by design, not Congress. Even if Congress wanted to pay off the national debt with fresh cash, the Fed would prevent it from happening.

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