Why is it dangerous for a government to keep printing money to pay off debt, and what are the possible effects of this on the economy?
Answer (1)
It is very dangerous for a government to keep printing money to pay off debt because it often leads to hyperinflation—a situation where prices rise extremely fast and money loses its value. When a country prints too much money without increasing the actual goods and services in the economy, there is more money “chasing” fewer goods. This causes prices to skyrocket because the money itself becomes less and less valuable.A clear example of this happened in Zimbabwe in the 2000s. The government kept printing money to pay bills and debts, but this caused massive inflation. At one point, prices were doubling every few days. A loaf of bread that cost a few Zimbabwean dollars ended up costing billions. People had to carry stacks of money just to buy basic food. Eventually, their currency became worthless, and they had to use foreign money like U.S. dollars to survive.In Asia, Vietnam and Indonesia also experienced high inflation in the past due to printing too much money. In the Philippines during the 1980s, the Marcos regime accumulated high debt, and although hyperinflation did not happen, inflation was high and caused great hardship. The value of the peso weakened, the cost of imports rose, and the poor were hit the hardest.When money loses value too fast, savers are punished, retirees suffer, and businesses can’t plan properly. People stop trusting the currency, and they might switch to bartering or using foreign currencies, which makes things even worse. Interest rates go up, borrowing becomes harder, and the whole economy slows down.That’s why most countries today have independent central banks like the Bangko Sentral ng Pilipinas (BSP), which prevent the government from printing money recklessly. They control the money supply carefully to avoid inflation spiraling out of control.
