# Something I still don't understand about printing money and inflation **URL:** \ **Category:** Factual Questions\ **Created:** [October 26, 2026, 12:43am UTC](https://boards.straightdope.com/t/something-i-still-dont-understand-about-printing-money-and-inflation/1034155 "2026-10-26T00:43:09Z")\ **Posts on this page:** 13\ **Page:** 1
**Author:** ![themapleleaf](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/themapleleaf/32/14349_2.png) [@themapleleaf](https://boards.straightdope.com/u/themapleleaf)\ **Post date:** [October 26, 2026, 12:43am UTC](https://boards.straightdope.com/t/something-i-still-dont-understand-about-printing-money-and-inflation/1034155/1 "2026-10-26T00:43:10Z")
As a kid, I once had a conversation more or less like this with my father: I said if I were an elected government official, I would print a lot of money so people don’t have to pay taxes. My father said that then there would be enormous inflation and everyone would raise prices. I then said I would make laws limiting how much shops can charge. My father countered that they tried that in Communist countries (such as Jugoslavia, from which my family came), and that things were so cheap that people bought them up and there were shortages. Well, OK. I guess I got the general principle - and it was illustrated quite well later in the Duck Tales episode[Dough Ray Me](https://tvtropes.org/pmwiki/pmwiki.php/Recap/DuckTales1987S3E7DoughRayMe), where the nephews use a duplicating machine invented by Gyro Gearloose to make many copies of a silver dollar, which ends up making zillions of coins that flood the city; people scoop the excess money up and shops and services respond by cranking up prices – as everyone evidently has money to spend --, and the nephews must find a way to reverse the inflation. But here’s something about the principle that I still don’t get as a middle-aged adult. The example given above with the Duck Tales story is an easy one, because everyone in town – both the consumer and the shopkeeper, had it in plain sight that there were piles of money for the taking everywhere around. But money is circulated through various channels and there is a lot of it. What if a large amount of money were passed in a more discrete way by the government? How would people on the ground know there was so much money in existence? Case in point: the idea of paying off national debt by printing money. There’s the famous example of the German Weimar Republic printing money to cover the reparations for World War I and inflation skyrocketing out of control, a factor which contributed to the rise of Nazism. What I don’t get here is – if money was printed and then sent to other countries, what caused that money to lose value at home? If the money sent to whoever was owed the reparation was out of circulation in Germany, Germans didn’t have access to it, so what caused the German Mark to depreciate in value at home? For that matter, how did the public even know that that Germany was printing money to send to other countries? How does a common shopkeeper or humble consumer know there are so many Deutschmarks in existence if they can’t see many of them or have access to them? I somehow feel that the answer to this is something simple that is right under my nose and that once the question is answered I will slap myself on the head and wonder how I didn’t get it before; I’m sure I could save myself a lot of embarassment by asking ChatGPT, which chatbot there is no doubt in my mind could give me a clear and accurate answer on this kind of question. Nevertheless I still have an urge to get a human answer for this question that has been plaguing me for years and am interested if it will bring about further discussion. ---
**Author:** ![Hari\_Seldon](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/hari_seldon/32/5173_2.png) [@Hari\_Seldon](https://boards.straightdope.com/u/Hari_Seldon)\ **Post date:** [October 26, 2026, 12:53am UTC](https://boards.straightdope.com/t/something-i-still-dont-understand-about-printing-money-and-inflation/1034155/2 "2026-10-26T00:53:41Z")
First place, I suspect the WWI reparations were in gold. But if they sent zillions of printed marks to various countries, they would try to use them to buy goods from whoever would take them, likely only Germany and you recreate the situation of more money than actual goods. Remember money was created originally as a surrogate for goods so you wouldn’t have to barter for any exchange. ---
**Author:** ![robby](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/robby/32/11048_2.png) [@robby](https://boards.straightdope.com/u/robby)\ **Post date:** [October 26, 2026, 12:59am UTC](https://boards.straightdope.com/t/something-i-still-dont-understand-about-printing-money-and-inflation/1034155/3 "2026-10-26T00:59:49Z")
If you flood the economy with newly-printed money so that everyone has more dollars (or German _Papiermarks_, or whatever) in their pocket, but you don’t increase the amount of goods and services available to buy, then you create a bidding war which drives up prices, thereby creating inflation. > [@themapleleaf](#): > > What I don’t get here is – if money was printed and then sent to other countries, what caused that money to lose value at home? What do those foreigners do with all of the newly-printed money they receive? They also can use it to buy goods and services from the country that sent it them, so it puts it right back into circulation and has the exact same effect of creating inflation. ---
**Author:** ![themapleleaf](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/themapleleaf/32/14349_2.png) [@themapleleaf](https://boards.straightdope.com/u/themapleleaf)\ **Post date:** [October 26, 2026, 1:01am UTC](https://boards.straightdope.com/t/something-i-still-dont-understand-about-printing-money-and-inflation/1034155/4 "2026-10-26T01:01:36Z")
> [@Hari\_Seldon](#): > > First place, I suspect the WWI reparations were in gold. So would loss of gold in Germany have devalued the Mark? Did they have the gold standard? ---
**Author:** ![Kent\_Clark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/kent_clark/32/105_2.png) [@Kent\_Clark](https://boards.straightdope.com/u/Kent_Clark)\ **Post date:** [October 26, 2026, 1:12am UTC](https://boards.straightdope.com/t/something-i-still-dont-understand-about-printing-money-and-inflation/1034155/5 "2026-10-26T01:12:06Z")
You’re asking two different questions here 1. Why didn’t the Germans pay off the war debt by printing money? Because the countries to whom they owed money wanted it in gold or some other tangible good. That’s part of the reason why the French seized the [German Saar region after both World Wars.](https://en.wikipedia.org/wiki/Saar_Protectorate#Post%E2%80%93World_War_I) 2. Why does the currency depreciate at home? Because people who have more money buy more things. The more things businesses sell, the more money they make to buy more things to sell to people. Eventually it gets too expensive to hire the additional employees and source the materials needed to make all the stuff people expect to buy. Or, let’s say you want to buy a house. Suddenly the banks are lowering mortgage rates because they have money to lend. When either their supply of money dries up or the builders can’t build enough houses to keep up with demand, it becomes harder to afford a house. Controlling the amount of money that gets injected into a country’s economy at any given time is the job of that country’s central bank. The modern equivalent to printing money is raising or lowering interest rates to induce people to buy or not buy government bonds. You’ll notice that the U.S. Federal Reserve Bank adjusts interest rates typically by small amounts - maybe 1/4 or 1/2 a percentage point at a time. ---
**Author:** ![themapleleaf](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/themapleleaf/32/14349_2.png) [@themapleleaf](https://boards.straightdope.com/u/themapleleaf)\ **Post date:** [October 26, 2026, 1:14am UTC](https://boards.straightdope.com/t/something-i-still-dont-understand-about-printing-money-and-inflation/1034155/6 "2026-10-26T01:14:46Z")
> [@Kent\_Clark](#): > > 1. Why does the currency depreciate at home? Because people who have more money buy more things. The more things businesses sell, the more money they make to buy more things to sell to people. Eventually it gets too expensive to hire the additional employees and source the materials needed to make all the stuff people expect to buy. Or, let’s say you want to buy a house. Suddenly the banks are lowering mortgage rates because they have money to lend. When either their supply of money dries up or the builders can’t build enough houses to keep up with demand, it becomes harder to afford a house. OK, so does that mean that Germany sending gold or other goods to the countries to which it owed money somehow caused Germans to have more expendable income at home? ---
**Author:** ![Kent\_Clark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/kent_clark/32/105_2.png) [@Kent\_Clark](https://boards.straightdope.com/u/Kent_Clark)\ **Post date:** [October 26, 2026, 1:33am UTC](https://boards.straightdope.com/t/something-i-still-dont-understand-about-printing-money-and-inflation/1034155/7 "2026-10-26T01:33:46Z")
> [@themapleleaf](#): > > OK, so does that mean that Germany sending gold or other goods to the countries to which it owed money somehow caused Germans to have more expendable income at home? Not exactly. What happened was that Gemany was paying off its war debt in gold and hard goods. But Germany also had to pay for its raw materials and imported goods, and it (specifically the Weimar government) tried to make up for it by paying its creditors off in marks that were worth less. [That drove the price of imported goods and raw materials ever higher, which the government tried to compensate for by printing more money, which drove the value of the money down, which caused prices to increase even more.](https://www.britannica.com/event/hyperinflation-in-the-Weimar-Republic) > Shopkeepers could not replenish their stock fast enough to keep up with prices, farmers refused to sell their produce for worthless money, food riots broke out, pensioners starved, and townspeople marched into the countryside to loot the farms. Also > Although economic mismanagement on the part of the Weimar government is usually blamed for causing hyperinflation, evidence suggests that speculators were also responsible: they started “short selling,” effectively betting on the value of the mark dropping. ---
**Author:** ![themapleleaf](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/themapleleaf/32/14349_2.png) [@themapleleaf](https://boards.straightdope.com/u/themapleleaf)\ **Post date:** [October 26, 2026, 1:36am UTC](https://boards.straightdope.com/t/something-i-still-dont-understand-about-printing-money-and-inflation/1034155/8 "2026-10-26T01:36:02Z")
OK, I think I’m getting it. Still, it seems just a tad more complex than I thought it would be. Or at any rate, all I remember learning was “Germany printed money to pay reparations and that caused hyperinflation.” ---
**Author:** ![Chronos](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/chronos/32/134_2.png) [@Chronos](https://boards.straightdope.com/u/Chronos)\ **Post date:** [October 26, 2026, 2:11am UTC](https://boards.straightdope.com/t/something-i-still-dont-understand-about-printing-money-and-inflation/1034155/9 "2026-10-26T02:11:28Z")
I think that the key point here is that economics isn’t really about money. It’s about limited goods, and determining who gets how much of those limited goods. Bad economic times come from either not enough goods total, or the goods that exist being distributed in a bad way. Good economic times come from goods being abundant and well-distributed. The question to ask isn’t “why does printing too much money cause inflation?”. The question to ask is “why would printing money cause either the amount or distribution of goods to change?”. And sometimes, printing more money really will cause the distribution of goods to improve for the better. When done in moderation, at least. But it’s certainly not something that just automatically happens. ---
**Author:** ![Francis\_Vaughan](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/francis_vaughan/32/3093_2.png) [@Francis\_Vaughan](https://boards.straightdope.com/u/Francis_Vaughan)\ **Post date:** [October 26, 2026, 2:31am UTC](https://boards.straightdope.com/t/something-i-still-dont-understand-about-printing-money-and-inflation/1034155/10 "2026-10-26T02:31:09Z")
The core point is perhaps that money in the form of printed notes or numbers in a bank account are not worth anything. They are a proxy for something that is worth something. The rate at which your money is exchangeable for something that is worth something is by agreement between you and the other party. So long as you are both comfortable that your money is a useful proxy for other things everyone is happy. The trick is that it remains useful and stable. There is a fixed amount of stuff that is worth something. The value of the money in circulation is fixed by the value of stuff that is worth something and that is possible to purchase. Inside an individual country the value of its currency is thus tied to the value of the goods services and property within. What an economy needs to grow is a way of making more money available in a controlled manner. This why governments “print” money. New money comes into circulation in different ways, but what is needed is a mechanism for controlling growth, which is usually the base interest rate charged for money by the country’s central bank. Businesses and individual people can borrow money, build houses, establish new businesses, create jobs etc and the economy grows nicely. A side effect is a small but real inflation rate. Fractional reserve banking (where banks lend out most of the money that is deposited with them) also increases the amount of effective money available. The base interest rate also affects this, again controlling the amount of money in the economy. A government in distress may be tempted to pay its workers and purchase goods and services by simply printing the money to do so. Thus there is no friction on the amount of money available, and there becomes more money chasing the limited value of goods, services and property. So prices rise. Where it becomes unstuck is when the populace loses confidence in the currency. Then an inflation spiral ensues. If your pay will buy less tomorrow than it will today you will spend it as fast as you can. In the extreme just the price of food may rise faster than your weekly pay packet can manage to buy enough to eat. Lending money is a fools game. In times of rampant inflation everyone tries to pay off their debts with highly inflated money. So the economy loses it ability to function normally. The cure is to restore confidence. Gresham’s Law makes this hard. “Bad money drives out good.” If you are being paid in fast depreciating in value Marks, and you have a small cache of US dollars under the bed, you won’t use the dollars. You will keep them for a rainy day. So the bad money - Marks - has driven the good money - dollars - out of circulation. The German economy was righted by creating a new currency and convincing everyone that this currency was not going to be subject to the loss of control of the old. And it worked. It may well not have. If your country owes another country money, the debt will be in a hard currency, one that is generally understood to be very stable and always welcome. The default is now US dollars. UK pounds way back, Gold for a long time. In international trade, the value of your currency is similarly essentially a proxy for the value of your country. So if you print money, and your country has not increased in value, the value of your currency drops. Obviously your country isn’t for sale, and the valuation is not actually the value of the country, but it is tied to the intrinsic size and health of the economy, as this is a proxy for the ability of a country to pay it debts. Debt in the modern world is also incurred by countries by selling bonds. The bond rate is a proxy for how confident the market is in that country’s ability to pay its debt. Bonds that are resold at a discount are not a good sign. A country that needs to increase the bond rate (the coupon) on new bonds in order to sell them is not a good sign either. An inability to sell any bonds on offer is a very bad sign. Significant inflation will force bond rates higher. Hyper inflation will make bonds impossible to sell. So again, it is critical that an economy remain stable in order to operate. Adding money without value will destabilise things, and risk heading into an inflationary spiral. Spirals are positive feedback loops and once started are very hard to put down. Hence why you see central banks impose deeply unpopular moves, generally interest rate spikes to dampen down supply. But this only works when the economy is still functioning. Once inflation reaches a serious enough level and confidence vanishes, putting the genie back into the bottle becomes ever harder. It requires balls of tungsten carbide and imposition of draconian measures that won’t just risk losing government, but may risk revolution. Sometimes you can’t get there from here. ---
**Author:** ![scudsucker](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/scudsucker/32/14101_2.png) [@scudsucker](https://boards.straightdope.com/u/scudsucker)\ **Post date:** [October 26, 2026, 6:22am UTC](https://boards.straightdope.com/t/something-i-still-dont-understand-about-printing-money-and-inflation/1034155/11 "2026-10-26T06:22:07Z")
> [@Francis\_Vaughan](#): > > The German economy was righted by creating a new currency and convincing everyone that this currency was not going to be subject to the loss of control of the old. And it worked. It may well not have. A recent example of “not working” was runaway inflation in Zimbabwe (2007 to 2009); despite assurances that the “new” Zimbabwe dollar would be tightly controlled, inflation continued to 89.7 sextillion percent(!). The Germans - despite the hardships and economic insanity - got lucky in comparison. ---
**Author:** ![Schnitte](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/schnitte/32/9033_2.png) [@Schnitte](https://boards.straightdope.com/u/Schnitte)\ **Post date:** [October 26, 2026, 7:48am UTC](https://boards.straightdope.com/t/something-i-still-dont-understand-about-printing-money-and-inflation/1034155/12 "2026-10-26T07:48:38Z")
It’s peripheral to the main theme of this thread, but still worth mentioning that one of the main drivers of inflation in post-WW1 Germany was the “Ruhrkampf”. In 1923, French and Belgian troops occupied the Ruhr region - one of Germany’s industrial heartlands - to enforce reparation claims. This caused a public outcry among the German public, and the government responded with a policy of passive resistance - Germans in the occupied areas were called upon not to cooperate with the troops in any way. This entailed comprehensive strikes in the affected industries, but of course the workers on strike had to make a living. So the government paid them an allowance, which was largely paid for by printing money. ---
**Author:** ![Mops](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/mops/32/16494_2.png) [@Mops](https://boards.straightdope.com/u/Mops)\ **Post date:** [October 26, 2026, 9:27am UTC](https://boards.straightdope.com/t/something-i-still-dont-understand-about-printing-money-and-inflation/1034155/13 "2026-10-26T09:27:44Z")
Right; so the driver of inflation was not “printing money to pay reparations” (which would not have worked as the reparations were denominated in gold, specifically in _Goldmark_) but “printing money to support strikers”. The main political act that was a precondition for ending hyperinflation was Germany throwing the towel on passive resistance in the Ruhr, in September 1923. That made financial markets trust the new currency.