Money 1

Today (06/17/08) Me, Kvulo & Selva had an interesting chat in the cafeteria while dinner, I would like to share those interesting facts to you all.

How does printing money work? As in, who regulates how much money a particular country can print for themselves?

Basically what I want to know is that who regulates this amount? What if the government of a particular country simply decides it will print some more money and use it, who will stop them and how will they be caught?

The individual country issuing the money polices itself. That is why some currencies are considered better than others, because they have a strong monetary policy so that people who do business in that money are confident in it. Countries like The US, UK, the European Union, etc have strong Central Banks that monitor how much money needs to be in circulation. Money is not flooded into the market to devalue everybody's wages and savings.

Other countries have poor financial control of their money making policy, and as a result have horrible problems with their money supply. A typical example is Ecuador. They are famous for having populist Presidents and corrupt politicians who when they would need money to spend on what they want so they simply ordered more money printed. Inflation in 1999 reached 2000% and economically destroyed the country. They desperately switched their currency from the home made Sucre to USA Dollars, which is the legal currency now.

Since then, their economy is stable, but politicians complain about only being able to spend what revenuers they have. Other countries who recently have had financial crisis due to spending and monetary mismanagement include Brazil and Argentina.

Wait for the update on crisis.