Disadvantages of Printing More Money

Readers Question: What are the disadvantages of printing more Money?

Printing more money will cause inflation.

The disadvantages of printing more money are:

1. Inflation will occur.
2. High inflation may require high interest rates to reduce demand and inflation. To get inflation under control may require a painful period of adjustment in the future.
3. It increases inflationary expectations. Making it more difficult to control inflation in the future.
4. High inflation may lead to a loss of confidence in the economy. Firms may become unwilling to invest. Foreigners may be unwilling to hold your securities and bonds. (Important for the US, where 25% of national debt is held by foreigners)
5. Depreciation in the exchange Rate. This makes imports more expensive. It makes it more difficult to pay foreign debt.

See also: Costs of Inflation