Why Can't the Government Just Print More Money?

Your kid has probably had this thought: “If the government can print money, why don't they just print enough so everyone is rich?” It's a genuinely good question. The answer explains a lot about how the world works.

Governments can print more money, and they do. But printing money doesn't create more stuff to buy. It just makes each dollar worth less. When countries have printed too much money, the pattern is the same: prices skyrocket, savings evaporate, and the people who get hurt worst are the ones who can least afford it.

Why can't a government just print money to make everyone rich?

They can print more, and they do. But printing money doesn't create more stuff. It just makes each dollar worth less. If the government doubled the money supply overnight, prices would eventually double too. Nobody ends up richer. Everyone's dollars just buy less.

The pizza party problem

Imagine your school has a pizza party. 20 kids, 20 slices. Everyone gets one. Now imagine the principal says, “Great news, everyone gets 2 tickets now!” But there are still only 20 slices. Now 40 tickets are chasing 20 slices. Each ticket is worth half a slice. Printing more tickets didn't create more pizza.

Money works the same way. Dollars are just tickets to buy real stuff: food, houses, cars, toys. Printing more tickets doesn't create more stuff. It just means each ticket buys less. As Saylor puts it: “I can create more real estate in New York City, I can create more cars... I can create more gold, I can create more shares of stock... Bitcoin is a scarcity... if the price goes up by a factor of a thousand or a million it is absolutely capped.”¹ The government can always print more dollars. Under Bitcoin's current rules, nobody can print more bitcoin.

What happened when countries printed too much money?

This isn't theory. Countries have done this, and the results are brutal.

Venezuela (2016-present): The government printed massive amounts of money to pay its bills. By 2018, inflation hit 1,000,000% per year.² A cup of coffee that cost 450 bolivars in 2016 cost 2.5 million bolivars by 2018. People carried cash in wheelbarrows to buy groceries. The currency became essentially worthless.

Zimbabwe (2007-2009): The government printed so much money they had to issue a $100 trillion bill. That's 100,000,000,000,000. It was barely enough to buy a loaf of bread. Prices doubled every 24 hours at the peak.³

Germany (1923): After World War I, Germany printed money to pay war debts. Inflation got so extreme that people wallpapered their houses with money because it was cheaper than actual wallpaper. A loaf of bread cost 200 billion marks.⁴

Why did U.S. inflation spike after 2020?

The U.S. hasn't gone full Venezuela (not even close), but it does create new money regularly. In 2020-2021, the government created trillions of new dollars for COVID stimulus.⁵ The M2 money supply jumped from about $15.4 trillion in February 2020 to over $21 trillion by early 2022.⁶ What followed? Inflation jumped to 9.1% in June 2022, the highest in 40 years.⁷ Grocery prices climbed. Rent went up. Gas prices spiked.

The government argues that a little money printing prevents recessions and keeps the economy moving. And there's some truth to that. But it always comes at a cost: your existing dollars become worth less. The Federal Reserve tries to balance this, but it's an imperfect science.

To be fair: money creation has sometimes prevented worse outcomes. The 2008 financial crisis might have been a full depression without the Fed stepping in.⁶ The 2020 COVID stimulus kept millions of families afloat.⁵ Whether anyone should have unlimited power to create it is a different conversation.

How Bitcoin solves the money printing problem

Bitcoin was created in 2009, right after the government printed billions to bail out banks during the financial crisis.⁸ It was designed so that no government, company, or person can create more than 21 million bitcoin under the current consensus rules. That's the whole point. It's money that can't be inflated.

The 21 million cap is baked into Bitcoin's code and enforced by every computer on the network.⁸ No committee votes on it. No president signs an executive order to change it. After reading this entire article about what happens when someone can create unlimited money, that's the thing worth sitting with: Bitcoin is the first monetary system where the supply is genuinely fixed. Whether that makes it better or just different is something reasonable people disagree about.

How to explain money printing to kids (parent talking points)

• “Why can't they just give everyone a million dollars?” They could. But then a gallon of milk would cost $5,000. If everyone has a million dollars, a million dollars isn't special anymore. The prices of everything would just adjust upward.
• “Is this why things keep getting more expensive?” Partly, yes. When the government creates more money, the dollars you already have buy less. That's inflation. We explain the full story in our guide on why money loses value.
• “Can Bitcoin stop this from happening?” Bitcoin can't stop governments from printing dollars. But if you hold some savings in Bitcoin, those savings can't be diluted by new issuance, because Bitcoin's current rules cap the supply at 21 million. It's a different tool with different tradeoffs.

Try this at home

The auction experiment (15 minutes, ages 10+). Give each kid 10 tokens (coins, beans, whatever). Auction off 3 items they actually want (candy, screen time, picking dinner). Run the auction. Note the prices. Then give everyone 30 more tokens and auction the same 3 items again. Watch what happens: the prices skyrocket, even though nothing about the items changed. That's money printing in action.

Materials: 40+ tokens per kid, 3 auction items. Time: 15 minutes.

Sources

1. Saylor, Michael. Interview on PBD Podcast, discussing Bitcoin as absolute scarcity
2. International Monetary Fund, Venezuela Country Data (2018 inflation estimate)
3. Hanke, Steve H. & Kwok, Alex K.F. “On the Measurement of Zimbabwe's Hyperinflation”, Cato Journal Vol. 29, No. 2 (2009)
4. Fergusson, Adam. When Money Dies: The Nightmare of Deficit Spending, Devaluation, and Hyperinflation in Weimar Germany (1975)
5. U.S. Treasury Department, COVID-19 Economic Relief (2020-2021)
6. Federal Reserve Bank of St. Louis, M2 Money Supply (FRED)
7. U.S. Bureau of Labor Statistics, CPI Report, June 2022 (9.1% year-over-year)
8. Nakamoto, Satoshi. Bitcoin: A Peer-to-Peer Electronic Cash System (2008)