How do countries end up with worthless currency? Like countries who’s dollar bills lie on the ground or are burned for warmth because it has no purchase power anymore
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Governments work like a business. In very basic terms they have costs (that’s usually called a “budget”) – things the government spends money on like building roads paying police officers etc. and revenue – that’s usually taxes, profits from government owned companies, exports etc.
Now if a business can’t cover their costs with their revenue it will close down. (Again this is in basic terms, because yes I know a business can borrow money but let’s assume this option has been exhausted)
However if the government cant cover their costs with revenue (and can’t borrow more money because people start to smell fish) it can just “print” more. This obviously causes the country’s currency to lose value but in the short term all the costs are covered and crisis is avoided. In a long term is this a gigantic problem. As basically foreign investors will pull out causing even more damage to the currency.
If the government (business-wise) doesn’t work well, it’s currency may become worthless just like a business goes bankrupt.
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