Updated: Aug 4
I'm sure most of you would have had this question while growing up, that why doesn't the government simply print money and end poverty in their respective countries.
This blog explains why they cant do so, what will happen if they do so, and also a real life example to what happened when a country decided to do so.
Before I begin to make you understand this, let's take a little dive into what money is and a little detail about the evolution of money.
Money- Long story short, money is simply a generally accepted medium of exchange. We believe that it has value.
-EVOLUTION OF MONEY
Barter System- In barter system, what you did was, let's say you wanted to buy a bag of rice, you exchanged your shoes or something of value with the bag of rice to buy it from someone who has it.
Gold- After sometime, Barter system was replaced with Gold coins, so if you wanted a bag of rice, you would buy a bag of rice and give gold coins in return.
Paper currency- Eventually, gold coins moved as well, and then came the paper currency, which we are using today as well. So, why a piece of paper has value, is because we believe that it has some value, it is signed by the RBI governor, or any other president which makes us believe that it has authenticity and carries some value.
Digital Wallets- Then came the digital wallets, as we slowly started adapting to it. Examples can be Paytm, Google Pay etc.
Cryptocurrency- People are still scared of crypto and don't hold a firm belief in the currency mostly because it isn't backed by any nation and for it's wild and frequent gyrations. Crypto is a vast topic, which is a blog for some other day.