why would printing more bills cause the value to go down? Why wouldn’t prices stay the same?
In: Economics
This is because most currencies are not tied to the value of some other limited thing, like gold.
Most modern currencies are like commodities on their own. And they are actually traded like commodities, usually through a Foreign exchange market. So just like any commodity if there’s suddenly twice as much and demand is constant, the value is now roughly halved.
In systems where the money is tied to the value of a specific limited item, The value can’t change unless the value of the underlying commodity changes; But, the central bank can only can only lend out as much money as they have the ability to pay back in that item.
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