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@ K.valor01
2025-05-23 19:50:46I was discussing with my friend and few of his friends about the inflation of naira in Nigeria 🇳🇬. Our discussions was flowing until he said that lack of production and too much importations are the major reason that devalued currencies, naira to be precise. As a baby bitcioner, I disagree with him and that's where our discussion turn to argument.
People often think that when a country prioritize productions than consumption that it will boost the value of there currency, but that is wrong. Production have it's impart on the economy of the country.
Increased Economic Growth: A trade surplus indicates that a country's output is high, contributing to overall economic growth, as measured by GDP.
Stimulated Consumer Spending: The influx of foreign currency from exports can be used to import goods, stimulating domestic demand and boosting consumer spending.
Potential for Higher Wages and Living Standards: Increased productivity and economic growth can lead to higher wages and a better standard of living.
Savings and Investment: The surplus can be used for savings, investment in infrastructure, or to reduce debt, further strengthening the economy.
Comparative Advantage: A country may specialize in producing goods and services where it has a comparative advantage, leading to higher productivity and efficiency.
Moreover, too production and exportation also causes inflation. country exports too much and its domestic demand doesn't keep pace, it could lead to inflation as businesses raise prices to cover increased production cost.
Meanwhile, the head lead of currency inflation is the printing of money in the air!.
"Printing money in the air" likely refers to the concept of central banks creating new money digitally, often through quantitative easing. This process involves the central bank buying assets, such as government bonds, from banks and other financial institutions, thereby injecting new money into the economy.
How it Works:
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Digital Money Creation: The central bank creates new money electronically, rather than physically printing currency notes.
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Asset Purchases: The central bank buys assets from banks and other financial institutions, injecting new money into the economy.
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Increased Money Supply: This process expands the money supply, which can lead to lower interest rates and increased lending.
Key Points:
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Quantitative Easing (QE): A monetary policy tool used by central banks to stimulate economic growth by buying assets and injecting new money into the economy.
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No Physical Printing: Unlike traditional money printing, QE creates digital money, which is then used to purchase assets.
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Impact on Economy: QE can influence interest rates, inflation, and economic growth.
The role of Central Bank's.
The central bank plays a crucial role in managing the money supply and implementing monetary policies, including QE. By controlling interest rates and the money supply, central banks aim to promote economic growth, stability, and low inflation.
There are key 🔑 negative effects of printing currency notes on air!:
Printing money, also known as quantitative easing, can have several negative effects on the economy. Some of the key concerns include;
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Inflation: Excessive money printing can lead to inflation, as more money chases a constant amount of goods and services, driving up prices. This can erode the purchasing power of consumers and reduce the value of savings.
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Currency Devaluation: Printing money can cause a decline in the value of a currency, making imports more expensive and potentially leading to higher prices for consumers.
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Distorted Financial Markets: The injection of liquidity into the economy can artificially inflate asset prices, creating market distortions and potentially leading to asset bubbles.
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Uncertainty and Confusion: High inflation can create uncertainty and confusion for businesses and individuals, making it harder to make informed investment decisions.
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Reduced Incentive to Save: Inflation can reduce the incentive to save, as the value of money declines over time.
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Menu Costs: High inflation can lead to menu costs, where businesses incur expenses to update prices frequently.
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Inefficient Allocation of Resources: Government spending funded by printing money can lead to inefficient allocation of resources, as decisions are driven by politics rather than market forces.
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Addiction to Fiscal Stimulus: The ease of printing money can create a dependency on fiscal stimulus, making it challenging to reverse course when economic conditions change.
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Long-term Consequences: The long-term consequences of printing money can be severe, including reduced economic growth, higher inflation, and decreased confidence in the currency.
It's worth noting that the impact of printing money can vary depending on the economic context. In times of recession or deflation, moderate money printing might be used to stimulate economic growth without triggering significant inflation. However, excessive or prolonged money printing can lead to negative consequences.
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