why is money so important when it is just paper that can be printed?
In: Economics
First off, it is very difficult to print money. The paper, the ink used, the design, the strips embedded are so difficult to replicate that people may end up spending more money on the attempt to do so than they print. But you probably don’t care about that. You’re asking why we give value to something that is potentially infinite provided we have the resources to print more of it.
The value of the US dollar is pinned to taxes. The US only accepts currency issued by the US in payment for taxes. Since people will always need to pay taxes, that money will always have value. Even when the US prints more, the value goes down, but it will always have *some* value because it is needed by people seeking to pay their taxes.
Other countries do it differently. They may pin the value of money to gold so that currency could always be exchanged for gold. This has advantages and disadvantages. It takes control of the value of currency out of their hands and places it in the gold market. Someone might feel safer storing their wealth in what are essentially gold vouchers since the value of gold has been historically stable, it may even go up. If some mountain of gold was discovered, or new super effective mining technique was invented, the price of gold would plummet and so would the savings of everyone who stored their wealth in that currency.
Pinning paper currency to tax obligations allows the US more control over the value of currency. They can cause inflation to happen at a steady rate, which is generally thought to be ideal since it incentives people to invest their money rather than hoard it where it’ll steadily loose value due to inflation.
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