Why did Obama have to borrow China's money, can't we just print our own money and use it?
Why do we have to borrow? Why couldn't Obama just have the department of treasury or whoever makes our money, make a bunch more? I know this is a very stupid question, but I am completely stupid when it comes to politics and economics; thats why i did not vote. Please explain to me.
Politics - 15 Answers
Random Answers, Critics, Comments, Opinions :
1 :
Inflation gets worse every year. It's certain. We don't want to make it any worse.
2 :
Obama has effectively done what i like to call "Biting". Now it's a question of whether or not Obama has bitten down on a lure or a piece of meat.
3 :
That would cause inflation to skyrocket. If you don't like paying 4 dollars for a gallon of gas now, just wait another year and see where it is at.
4 :
Inflation makes money worth less. Pretty soon Quarters will be worth as much as penny's and at mcdonalds there will be a 100$ menu instead of a dollar menu.
5 :
Well, im no expert, but when i asked that question like last week my dad explained to me that the more money printed by the country, the less value it has. If Obama just has the American Treasury print off the billions of dollars for which the country is in deficit, the money would be worth next to nothing in the global market.
6 :
That's not how economics work.
7 :
Paper money is backed by gold. Sure the Treasury can print more money, but it wouldn't be worth anything. Like the Peso. China has been "bankrolling" the US for a long time. If China cuts off the money, down goes the US.
8 :
when you print off more money then it loses its value so you might have to pay 20k for a loaf of bread. because the moneys almost worthless. after ww1 Germany did that and because it became worthless people used it as confetti on new years.
9 :
He is printing it because nobody wants to float the loan. Printing the money means inflation, especially when the fed won't raise interest rates to keep inflation in check.
10 :
When you make more money it loses its value. In simple terms if you have a one of a kind baseball card it is worth a lot, but if you were to discover 100 one of a kind cards it would be worth less. Same with money.
11 :
Money represents a portion of physical wealth or resources - if you print more then you make each dollar worth less. If there are 100 dollar bills in the world, then each dollar is worth 1/100th of the total wealth of the US. If there are 1000, then each is worth 1/1000th of the total wealth. Wealth is this case being physical resources like corn, steel, oil, gold, computers, and cars. Since printing money does nothing to increase actual physical resources, then it does no good except to cause massive inflation. What China did was offer the US a portion on their wealth in exchange for interest later on. EDIT: Paper money is NOT backed by gold, it is backed by a country's fiat, reputation, and GDP.
12 :
Neither our president nor congress prints money. The Federal Reserve was created to issue currency to prevent political swaying. Anything the U.S. government does, it issues debt in the form of bonds. The major buyer of these bonds IS the Federal Reserve, but other times it can be foreign countries or even our own citizens. Unfortunately, Americans do not save and are unable to offer up any money. Japan and China are the FOREIGN largest buyers of our debt, but this is due, in part, to us having a huge trade imbalance. Right now our trade deficit with China has reach unprecendented levels. What happens is we use US money to buy goods from China.. China then takes these US dollars and reinvests them into the US by buying bonds or investing privately. Economists who say that deficits don't matter (me NOT being one of them) say that since the money will inevitably end up reinvested back into America, there is no concern for trade deficits. So when Obama says, "Hey.. will you buy this debt bond from the US government" China thinks, "I really have no other choice do I? I have to invest these US dollars somewhere". So China has us by the balls.. we have China by the balls. The only way they can get out out this mess is to let their currency value float and let the yuan achieve its true value. By devaluing their currency to grow at unprecedented levels, China has only made themselves a patsy.
13 :
When we were on the Gold Standard (the way I remember it): If there was 1 trillion dollars in gold backed currency in the US, and that is all of the currency that was out there every dollar would be worth a dollar. The way we work since getting off the Gold Standard: If there was 1 trillion dollars in gold backed currency in the US, but someone printed another 1 trillion in paper money (without gold backing it up) then all of the currency that was out there would only be worth 1/2 as much or a dollar was worth $0.50. I think a dollar is worth MUCH less than a dollar at the moment and Obama did not help yesterday either.
14 :
same reason Bush borrowed a trillion to throw into the Iraq rathole. Its not at all a stupid question, and so far, I have not seen one reasonable answer! OK Here is the correct answer: We have a huge trade deficit with most of our trading partners. You buy a toaster made in China and pay for it in US dollars. The Chinese company takes the dollars home, but they can't pay their workers or buy food or 'stuff' with US dollars, so they go to their central bank and say "Mr Central Banker: please give me Yuan for these US dollars", and the Chinese central bank "prints" money, from nothing, and gives it to the company. The Chinese Central bank, sometimes using "Sovereign Wealth Funds", take some of these US dollars and buy US Treasury bonds with them. They are not "new" credit, its old credit that our central bank printed from nothing. The second thing you need to know is the monetary system in the USA is debt backed. Whenever NEW credit is created, it is associated with a debt instrument, more US government treasury bonds. Creation of new money, faster than our rate of growth, causes, eventually, inflation. So, both things are happening: the Federal Reserve does create new money, from nothing, and pump it into the banking system. Each time they do this, they sell treasury bonds. Its called an "elastic" monetary system, since the Fed can buy treasuries to create money, and sell treasuries to reduce the money supply. The bad thing is that, for every dollar of credit in existence since 1913, teh US taxpayers must pay interest on those bonds forever. The US treasury never retires debt, they just keep rolling it over. Its the single largest shell game, and mechanism of transfer of wealth created in world history. The US Treasury also prints even more treasury bonds, and gets the Chinese to loan us our money back again, and pay them interest, forever, since the Treasury never retires any debt. Our two biggest problems are: 1) the US trade deficit, that allows US dollars to pile up in foreign central banks (China, Japan, Europe, the oil countries), and 2) our debt backed monetary system. Neither are fixable, we have to wait until they collapse, which they will eventually. Just look at the graph of the increase of the national debt. Its exponentially increasing. Any third rate "C" engineering student will tell you that nothing can increase exponentially very long. As an aside, someone below said something like "Obama's printing money like mad...". The presidentt has no, absolutely no control over the monetary system. Its a little group of private bankers that operate in secret and do whatever they want to benefit themselves that controls the money suppply. Its the Federal Reserve system itself that is broken. Once you realize that, then you will start to understand why the money suppply increase at double digit rates even when the country is contracting. Its the mechanism of wealth transfer.
15 :
Oh, believe me he's printing money like it's going out of style. But not only are we going to have to pay for it, but so are our children, grandchildren, and greatgrandchildren, in higher and higher taxes! Please, before the next election, get educated, get registered, and vote, it's you right as a citizen! That is until Obama and his regime take it away!
