If printing more money is the cause of inflation, why can't governments stop hyperinflation by removing money from their money supply?
by 
Jim in a Nautilus COAT
ANSWERS: 8
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I suppose that's what's is happening now - and the result is recession - no money circulating in the economy, nobody spends, no inflation but no growth.
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That is what the Fed is supposed to do when things start returning to normal. They have done it before and no doubt will do it again.
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C'mon, Jim. You know the American way is to spend, spend, spend, and then charge, charge, charge.
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Overprinting is only one contributor to inflation. The hyperinflation being seen in Zimbabwe is the result of several things operating in a spiral. Goods become scarce, and the price rises according to the principles of supply and demand. This causes the cost of living to increase, which forces employers to raise salaries to compensate. Those businesses must then raise the price of their goods to remain profitable. This moves up the "food chain" to the government, which perceives a cash shortage and then prints more money to alleviate it. The new currency in the system debases the value of that currency, which causes prices to rise again, ad nauseum. Removing currency from the system might help to slow the inflation, but it won't stop it. The only way to do that is to find a way to bring money in from outside the system--exports must equal or exceed imports, so that wealth is entering the economy rather than leaving it. Currency != wealth Production = wealth
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Printing more money is normally done by Governments to meet their deficit financing needs. It does create inflationary pressures. However normally economic growth resulting from the deficit budget ensures that the inflation is within manageable limits. It is when there is no economic growth with high deficit financing and printing of more money by the Governments that hyperinflation results. In this scenario what the Governments do is to mop up the excess money supply by putting curbs on the Banking System's ability to lend. It does work but at the cost of exployment opportunities to the work force. It also reduces the wages of the work force leaving less money with them to spend. Modern economies are so finely balanced that when one section is touched the results show up in others. It is a very fine balancing act that the Governments must do. Mopping up liquidity alone will not serve the intended purpose.
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Inflation is also caused by the US dollar supporting worthless currencies! But strong ones also support the dollar! Which do you think has the greater effect?
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The job of the Fed is to determine how much money is made and thus controlling our entire economy and thus controlling our entire government...
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True, printing money causes inflation and devaluation because the money is worth much less than it should. When a large amount of money is withdrawn from circulation, the circulating balance must be readjusted in its real value. So if half of the money we now have in circulation is removed our $1.00 will be worth around 50 cents, we would then have lost 50% of the value of each dollar and that is called devaluation. That is what happened with Poland and several other countries and it did not help. At present each $1 is truly worth 65 cents because our money has lost its value, it is just plain green paper. I personally believe we need to return to the gold standards. I am very interest in knowing where the huge amounts of gold bars we had are now. I have heard terrible things about the gold reserves, check what Ron Paul has said about this subject (You Tube videos).
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