proO1:

@ Adeibi, lol. For a long while I also wondered why some countries were rich and some poor. I wondered why governments couldn't just print as much money as possible to bridge the gap! But then. . . .

Seun has done a good job in breaking it down with ingenius simplicity and clarity. It is clear enough. But then a few grey areas remain. . .

One angle that I have not yet figured out is the extent to which printing excess money (in itself) can actually cause hyper-inflation if such excess cash is not directly released into the economy (though increased salaries, cash handouts to citizens, etc,). This is especially so in the increasingly integrated global economy that characterizes the new world order. For instance, if government simply prints excess cash and strictly uses such cash to fund key infrastructure projects such as massive road construction and power supply (especially with imported materials, labout and foreign contractors that would repatriate the project funds to their home countries), then to what extent can such printing of excess money result in inflation in the local economy - since such cash was not directly injected into the economy? ? ? I hope someone understands what I'm trying to say. I would really appreciate explanations for this:

Why can't government simply print 10 trillion naira in cash to, for instance, build a national rail system and reconstruct the entire power infrastructure using foreign contractors? Since such cash would not be directly injected into the economy, would it also cause hyper-inflation? How? I apologize for my ignorance in advance.

adeibi:

Great contributions from you all.
I didn't know that printing money for projects & development will one way or the other eventually lead to inflation.
Thanks for teaching me that but according to OYINBOGOJU, Japan and Qatar did that, have their economies been inflated by so doing?
Will like to read more comments

rhymz:

Well, I want to disagree a little that printing money will always lead inevitably to inflation. I believe there are cases where governments have printed their way out of economic recession and its likes- the big US bailout comes to mind. I think the problem lies with the fact that we do not have the expertise, economic mechanisms & reach to checkmate any adverse effect occassioned by doing so.
I have always asked too in thesame breath like the op, what if a country prints its own money and use it to buy goods and make debt payment outside of her country so that the brunt of inflation, currency devaluation etc will be borne by the other countries who have accepted to do business with the printing country. Afterall, how do you tell the difference that monies being used for transactions between countries are a deriative of wealth creation and not just printed money.nd not just printed money.

OYINBOGOJU:

Thank to all the great minds that have said something after all but rather than hit the nail on the head a lot of people are depending on 1 theorem by 1 Oyinbo to undermine our development.

As for me, i speak based on fact and vivid examples

1, Nigeria have a vision 2015 but later changed to Vision 2020

   how do we hope to achieve this?

Possible answer

We are waiting for Dangote  to crash the price of cement before we can all have houses on our head.

My thought

I guess the Government owe us the responsibility to provide us accommodation, is that not part of vision 2020

How do we achieve vision 2020 when we are still waiting for Mr. Dangote before we could start laying the foundation of our dreamed home.

In Japan

I can confidently tell you that the government put up every great building like it is done in America,so that they can fulfilled their dream and not waiting for anybody.

Yes vision 2020 but no jobs

Sanusi is busy with Islamic Banking to landmark his great achievement


Is that the only system that can eradicate poverty.

In China

Banks owe the people responsibility to finance every great idea.

We do have this ideas in Nigeria but how has anyone fulfilled the idea, since the our banks are not corporative.

They only borrow the rich more money, Imagine people like Bankole getting big loan worth 10Billion to finance the increase salary of their staff


I am tired of talking about God barons Pastor living like Drug barons, all because the congregation are waiting for God to Print more money for us when it can be done over there in ABUJA.


IN JAPAN

The homeless have the right to walk into any eatery and get whatever they want to eat

In what way has Government done anything in the interest of the Masses.

Don`t give me money
I don`t need free Education
I don`t need free Electricity
I don`t need free Water
I don`t need free road


BUT let the government print more money to
Develop new road and not give it to babalakin and co.
Let the Government print more money to equip our school from Nursery to University and let see if people won`t pay to go there
Let the government provide more money to make stable power supple and lets see if people won`t pay their bills monthly
Let the Government provide us with clean water and lets see if the Citizen will not stop dyeing of Cholera



NB

I heard only 2 or 3 teaching hospitals have MRI SCAN in Nigeria, Why cant government print more money to buy them and put them in all hospital when
Ordinary clinic in Japan can boast of atleast ONE MRI SCAN.



STOP GIVING FREE GIFTS OH DEAR RULERS

PRINT MORE MONEY TO FULFILL YOUR RESPONSIBILITIES.

YOU OWE THE CITIZENS GREAT THINGS OF LIFE AND IT CAN ONLY BE DONE BY PRINTING MORE MONEY AND USED IT JUDICIOUSLY  



MY QUESTION  WHY DO WE WAIT ON GOD TO PROVIDE US WITH GREAT THINGS OF LIFE,WHEN OUR DEAR GOVERNMENT  CAN PRINT MORE MONEY TO FULFILL OUR LONG LONG TIME DREAM.

rhymz:

I would be grateful if any one had any
thoughts on the following question.
I understant that if a government
were to print more money and
circulate it into its own economy, that
this would inevitably lead to increased
inflation in its country. Sound
argument for not printing more
money.
But why would a country not print
more money to purchase from other
countries (e.g. to repay debt or to
purchase raw materials). Wouldn’t the
extra money then simply be dumped
into the other country, leading to
higher inflation in that country and not
your own? Or perhaps is the answer
that in dumping the extra money
overseas, you are indirectly creating
more money in your own territory?
Maybe a naive question but I would
love to have a good answer to it!

2bosun:

There is more than enough money as is to go round my brother. All the money ends up in the hands of Bank-ole and co. So even if they print the money, what are the chances that the common man would smell any development? I'd say the chances are slim- What you need to ramble about is that your government should have some fear of God and release some of that money they stash abroad. Printing more money would be a lazy solution to a much more complex problem.

2bosun:

You've answered the question, as international a currency as the dollar is- if it's printed to pay debts in other countries etc. It will still find it's way back into the home country. You can't "dump" money abroad, dollars are useless in China etc., so they just return the money for goods/services in America where it's a legal tender. Inflation is only when you have your own currency chasing your own goods and services, another man's currency can't pay for your goods in your country.

Let's not even go near the Naira because the Naira is barely recognizable beyond the boundaries of Nigeria. I hope it helps, maybe a real economist could help me out here?

rhymz:

This explanation completely ignores
the fact that when the government
“borrows” money from the Central
Bank that’s exactly what it does. It
creates the money out of thin air and
gives it to the government to spend in
exchange for Government debt (i.e.
IOU’s).
Not only that, but through the process
of fractional reserve banking private
banks use the Central Bank’s “new
money” as the basis for increasing the
money supply by an additional 1,000%
(10X) through private lending.
Adding insult to injury, not only does
the current system multiply the
inflationary impact of government
deficit spending (10X as much as if the
government had simply been honest
and printed the money itself), but it
also requires the government to levy
additional taxes on our children to
“repay” the principal and interest on
the original “loan”.
The fact is, if the government cut out
the middleman and used seignorage
(i.e. the government’s power to levy an
indirect tax on its citizens by simply
printing more money) we would all be
much better off (at the expense of the
bankers).

Digriz:

Those foreign companies wl never accept naira for their business transaction wt d government, u hv to pay them in dollars and printing a lot of naira will mean lots of naira chasing a few dollar and the naira wld be worthless.

OYINBOGOJU:

Thank to all the great minds that have said something after all but rather than hit the nail on the head a lot of people are depending on 1 theorem by 1 Oyinbo to undermine our development.

As for me, i speak based on fact and vivid examples

1, Nigeria have a vision 2015 but later changed to Vision 2020

   how do we hope to achieve this?

Possible answer

We are waiting for Dangote  to crash the price of cement before we can all have houses on our head.

My thought

I guess the Government owe us the responsibility to provide us accommodation, is that not part of vision 2020

How do we achieve vision 2020 when we are still waiting for Mr. Dangote before we could start laying the foundation of our dreamed home.

In Japan

I can confidently tell you that the government put up every great building like it is done in America,so that they can fulfilled their dream and not waiting for anybody.

Yes vision 2020 but no jobs

Sanusi is busy with Islamic Banking to landmark his great achievement


Is that the only system that can eradicate poverty.

In China

Banks owe the people responsibility to finance every great idea.

We do have this ideas in Nigeria but how has anyone fulfilled the idea, since the our banks are not corporative.

They only borrow the rich more money, Imagine people like Bankole getting big loan worth 10Billion to finance the increase salary of their staff


I am tired of talking about God barons Pastor living like Drug barons, all because the congregation are waiting for God to Print more money for us when it can be done over there in ABUJA.


IN JAPAN

The homeless have the right to walk into any eatery and get whatever they want to eat

In what way has Government done anything in the interest of the Masses.

Don`t give me money
I don`t need free Education
I don`t need free Electricity
I don`t need free Water
I don`t need free road


BUT let the government print more money to
Develop new road and not give it to babalakin and co.
Let the Government print more money to equip our school from Nursery to University and let see if people won`t pay to go there
Let the government provide more money to make stable power supple and lets see if people won`t pay their bills monthly
Let the Government provide us with clean water and lets see if the Citizen will not stop dyeing of Cholera



NB

I heard only 2 or 3 teaching hospitals have MRI SCAN in Nigeria, Why cant government print more money to buy them and put them in all hospital when
Ordinary clinic in Japan can boast of atleast ONE MRI SCAN.



STOP GIVING FREE GIFTS OH DEAR RULERS

PRINT MORE MONEY TO FULFILL YOUR RESPONSIBILITIES.

YOU OWE THE CITIZENS GREAT THINGS OF LIFE AND IT CAN ONLY BE DONE BY PRINTING MORE MONEY AND USED IT JUDICIOUSLY  



MY QUESTION  WHY DO WE WAIT ON GOD TO PROVIDE US WITH GREAT THINGS OF LIFE,WHEN OUR DEAR GOVERNMENT  CAN PRINT MORE MONEY TO FULFILL OUR LONG LONG TIME DREAM.

proO1:

Thanks a lot. I believe this explains it. From all indications, the same principle holds true no matter how one looks at it: too much money chasing too few items would ALWAYS result in a devaluation of the money and cause inflation. . .even if the item being chased is a foreign currency like the dollar.

It therefore seems that the only solution is for countries to be productive. Any wonder, then, that industrialization is almost always synonymous with wealth? The most industrialized countries are almost always the richest - in terms of GDP at least (I think Adam Smith discusses this in his classic work, The Wealth of Nations). And in the context of the great explanations you guys have made here, it is all very clear now.

Unfortunately, any hope of industrialization for Nigeria seems far-fetched. And considering the size of our population, there is little hope that an over-reliance on oil revenues would have the same kind of positive effects it has on tiny sheikhdoms like Qatar, Kuwait, Brunei etc. Even if governments in Nigeria suddenly stop being corrupt and decide to put the oil money to good use, it would still take a while to bring about the industrialization that would increase productive capacity and create real wealth. However, since our governments have no immediate plans to eschew corruption, and since there are no viable short-cuts (e.g. Printing more cash), I guess national wealth would remain a mirage for Nigeria. Trouble.

Claus:

Economics should be compulsory up to SSCE level.

Great to see some of the explanations on here. Although I'm alarmed at the understanding of Economics here, I'm glad people are bold enough to ask questions and humble enough to listen to the answers.

As someone showed before, any extra money printed will find its way into the economy. Inflation occurs when too much money chases too few goods.

A simple economy that has just 10 cows and money supply of N100, would have the cost of each cow at about N10. Increase the money supply to N1,000 without having produced any more cows and you get the price of cow shooting up to N100 each. Hence the inflation. The exact mechanics of how this price increase works in a complex economy can be complicated.

With regards to printing more money to pay off foreign debt. Even if the foreign creditors will accept Naira, the value of Naira is based on the demand and supply of other currencies relative to the Naira. For example if Nigeria increase its money supply, more people have Naira and they will use some of this Naira to try to buy pounds. The demand for pounds relative to Naira increases. This increases the value of pounds and reduces the value of the Naira. We then need more and more Naira to buy the same amount of pounds, thereby defeating the whole purpose.

In a global economy where information travels fast, a huge demand for pounds from Naira holders can change the exchange rate within hours.

Hope that has helped.

Claus:

For example if Nigeria increase its money supply, more people have Naira and they will use some of this Naira to try to buy pounds. The demand for pounds relative to Naira increases. This increases the value of pounds and reduces the value of the Naira. We then need more and more Naira to buy the same amount of pounds, thereby defeating the whole purpose.

In a global economy where information travels fast, a huge demand for pounds from Naira holders can change the exchange rate within hours.

Hope that has helped.

kulutempa:

At the end of the day, money is nothing but a store of value. The only reason why it was invented was for convenience, and not to replace whatever goods and services people were producing and exchanging with each other beforehand, by way of barter.   

dramenda:

The honourable poster and everybody that have contributed meaningfully to this post.God bless you all.i have learnt alot and so those monitoring the thread.NLders am proud of you guy.

unphilaz:

nice discuss. the thread is divided into dont print more money which will lead 2 inflation VS print more money 4 development and use the benefit to reduce inflation. i think the latter should be considered.

rhymz:

I would be grateful if any one had any
thoughts on the following question.
I understant that if a government
were to print more money and
circulate it into its own economy, that
this would inevitably lead to increased
inflation in its country. Sound
argument for not printing more
money.
But why would a country not print
more money to purchase from other
countries (e.g. to repay debt or to
purchase raw materials). Wouldn’t the
extra money then simply be dumped
into the other country, leading to
higher inflation in that country and not
your own? Or perhaps is the answer
that in dumping the extra money
overseas, you are indirectly creating
more money in your own territory?
Maybe a naive question but I would
love to have a good answer to it!

2bosun:

You've answered the question, as international a currency as the dollar is- if it's printed to pay debts in other countries etc. It will still find it's way back into the home country. You can't "dump" money abroad, dollars are useless in China etc., so they just return the money for goods/services in America where it's a legal tender. Inflation is only when you have your own currency chasing your own goods and services, another man's currency can't pay for your goods in your country.

Let's not even go near the Naira because the Naira is barely recognizable beyond the boundaries of Nigeria- so you can't use it to pay for anything beyond Nigeria. I hope it helps, maybe a real economist could help me out here?

proO1:

Unfortunately, any hope of industrialization for Nigeria seems far-fetched. And considering the size of our population, there is little hope that an over-reliance on oil revenues would have the same kind of positive effects it has on tiny sheikhdoms like Qatar, Kuwait, Brunei etc. Even if governments in Nigeria suddenly stop being corrupt and decide to put the oil money to good use, it would still take a while to bring about the industrialization that would increase productive capacity and create real wealth. However, since our governments have no immediate plans to eschew corruption, and since there are no viable short-cuts (e.g. Printing more cash), I guess national wealth would remain a mirage for Nigeria. Trouble.

adeibi:

My heart bleeds for Nigeria.
There seems to be no hope and that's very worrisome.
9 years to the year 2020 and we've not achieved any of the visions.
Things are easier said than done I guess.
We're very good in visionising but very poor in making it a reality.

[b]The number 1 and most important step to starting/achieving industrialisation is having a constant power supply.
[/b]That should be numero uno on Bros GEJ'S list.
If that's the ONLY thing he can achieve then he has achieved everything.
He should pursue it squarely and stop jumping from one project to another thus leaving them half way.
He should completely solve the POWER problem, if he has more years to embark on another project, fine, but if he doesn't, the next administration will choose another and solve completely too and so on.
That's the only way I see the change we want coming to reality IMO.
I love my country and I hope my dreams for this country come to pass