Why Can’t The Government Just Print More Money To Solve Poverty?

A friend asked me this question and I thought it would be good to share the answer here.

Honestly, I had the same concern a few years back and was able to immediately get the answer after a couple of searches online.

But of course, I wouldn’t want you to leave this site so I’m giving you the answer below.

So again, why can’t the government, particularly the Central Bank of the Philippines, just print trillions of P1,000 bills and give them to all the poor people?

First, because that would make all the rich and middle-class people angry, and they would surely demand to be given those bills too.

Second, giving poor people tons of money won’t guarantee that they’d spend it wisely. If having millions automatically guarantees you’ll stay rich for the rest of your life, then why do you some lottery winners go bankrupt after a few years?

Plus, as they say… “Give man a fish, and he’ll eat for a day. Teach him how to fish, and he’ll eat for the rest of his life.”

Third, and probably the main reason why you can’t just print money and give it to everyone is because hyperinflation will happen.

Hyperinflation In A Nutshell

Imagine that you’re an entrepreneur who runs a restaurant in a small town. One day, Henry Sy arrives and gave everyone 10 million pesos. Suddenly, everybody starts eating out because, who wouldn’t?

Your restaurant will probably be so busy catering to all the hungry townspeople that you would be forced to work harder than you usually do to keep up with the influx of customers.

But you don’t want to work harder because you too, of course, received 10 million pesos. So what do you do?

The easiest solution is to raise the prices of your food.

What used to be your P80 plate of spaghetti, you would probably now sell for P800 because you know people can afford it, right?

From P80 to P800 – that’s a 1,000% increase in price! And what just happened, in a nutshell, is what you call hyperinflation.

Which means, if the government starts printing more money and gives it to everyone, then the prices of goods and services in the country will dramatically increase, and the value of our currency will drastically fall in the global market.

Of course, this is just a simple explanation and there are many factors that are involved here. But I know you get the point why it’s a bad idea for the government to just give everyone lots of money.

Hyperinflation In The Philippines

Has hyperinflation happened in the country before? The answer is yes!

According to Wikipedia:

The Japanese government occupying the Philippines during the World War II issued fiat currencies for general circulation. The Japanese-sponsored Second Philippine Republic government led by Jose P. Laurel at the same time outlawed possession of other currencies, most especially “guerilla money.”

The fiat money was dubbed “Mickey Mouse Money” because it is similar to play money and is next to worthless. Survivors of the war often tell tales of bringing suitcase or bayong overflowing with Japanese-issued bills.

In the early times, 75 Mickey Mouse pesos could buy one duck egg. In 1944, a box of matches cost more than 100 Mickey Mouse pesos.

In 1942, the highest denomination available was 10 pesos. Before the end of the war, because of inflation, the Japanese government was forced to issue 100, 500 and 1000 peso notes.

Start and End Date: Jan. 1944- Dec. 1944
Peak Month and Rate of Inflation: Jan. 1944, 60%

So now you know why the Central Bank of the Philippines can’t just print more money and give it to everyone.

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1. Hi Fitz, thank you for sharing. i have exactly the same question once in my life. but still i wonder, why can’t the government print more money, but instead on simply giving away to people, use the money to increase budget for education, build more schools, make livelihood and other stuffs that will give people decent jobs and better life. then poverty will be solved.

2. Printing more money is the same as violating the law of supply and demand. Should there be more money in circulation that will make it worthless. Back in the early days, our money is backed-up by the Gold Standard that a particular Central Bank possess that regulates our finances which would be a good measure for the circulating money available, but the scarcity of the precious metal makes it difficult for a country to base the value in it. So most Central Banks are now printing a fiat money ( based on trust given by the government, look at the wordings at your bill) which produces hyperinflation and making it hard for countries with Foreign Debt to pay the interest alone.

3. printing more money out of thin air will result to more poverty. Even if the poor have money, the money they have does not a purchasing power. It means that they will still not be able to buy their needs because of price increase. Worse, they may be poorer than before.

4. One good example why the gov cant just print money its because it will make the PESO worthless. Imagine if theres plenty of gold everywhere where you can just pick it up down the road just like picking pebbles and rocks, it will make the gold worthless as its not rare anymore. Same with money.

5. Like what is happening to the US. The federal reserves way back then. Pautang sa tao na walang porsyento o mababang porsyento. =)

6. 1. Why can’t the government just print more money for its budget so they can cut the taxes of the employees who are earning very small?
2. Why can’t the government just print more money to solve the country’s debt, buy electric power,oil and create more power plants, business and agricultural infrastructures? Since I guess you will also need money to teach the people how to fish, for they can’t afford their own boat, net,and the government should also guard our seas from other country stealing out fish and marine resources.
3. Just how much and when does the government need to print more money?

But bottom line I guess the government should be taught how to use/invest the Peoples Money more wisely, efficiently and prioritize which project will benefit most people. Stop Corruption. Palibhasa kasi karamihan sa kanila hindi nila pera yung ginagamit nila kaya di nila alam kung gaano kahirap kumita ng pera. I know since I worked with government before, and I witness how they misuse the People’s money. IF perhaps the government value more how they use the country’s resources like a good business man does, I think WE CAN ALL PROSPER. Peace and Merry Christmas Po.

7. Hehe, I also asked myself the same question years ago. I thought it would make everyone happy and that the only thing that’s stopping the government is that people would depend on dole out money.

Thanks for this informative post Sir Fitz.

8. Education, quality training is probably the way to ease poverty. Give people skills that they can use effectively. Few people want to be poor, without tools they have no choice.

9. Not the best answer, but this is ok for the dummies.

10. I remember in college when our prof explained the answer to this, which is similar to what Tony said – the Gold Standard and equating the laws of supply and demand. We have like the “National Treasury of Gold” and the production cost of the money being produced by the Central Bank comes from this Treasured Gold. Correct me if I’m wrong but that’s how I remember it

11. i remember my prof saying that we can not just print out money because we need something to back it up. that’s why we loan from IMF and WB. and also we need permission to do so. i can print out money. anyone can. as long as we can make the same exact copy then why not?