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Message: <blockquote data-quote="Smartm" data-source="post: 25372195" data-attributes="member: 114079">Let's  suppose you have 100 kgs of gold and there are 10 people in your  family. You now decide to distribute the gold between all the family  members. However, instead of giving everyone 10 kg of physical gold, you  give everyone a coupon that one could get 10 kg of gold in exchange  for. So 1 coupon = 10 kg of gold; 10 coupons = 10 x 10 kgs of gold. = 100 kgs of gold. Now,  each of those 10 members marry and bring a spouse into the family. Now,  there are 20 members. However, the gold is still 100 kgs. In order to  divide the gold equally among all members, you print 10 more coupons and  hand them over to the new members of the family, while informing  everyone that a coupon now can only be exchanged for 5 kgs of gold.Therefore, after spouses come in: 1 coupon = 5 kg of gold; 20 coupons = 20 x 5 kgs of gold = 100 kgs of gold. It  should be obvious now that printing more coupons does not increase the  value of the individual coupons because the 'wealth' of the family has  not increased: it is still worth only 100 kgs of gold. However,  if by some great fortune, you were to now acquire additional 100 kgs of  gold, each coupon now automatically becomes worth 10 kgs of gold. 1 coupon = 10 kgs of gold; 20 coupons = 20 x 10 kgs of gold = 200 kgs of gold. A  country too functions in much the same way where the currency note  functions as a coupon that has an inherent value. Printing more currency  notes (coupons) will only reduce their inherent value in direct  proportion to the number of additional currency notes printed. The  value of currency notes increases only when the 'wealth' of the country  increases. This wealth is typically measured in GDP, GNP etc. The more  wealth a country creates and accumulates, the more valuable its currency  notes become. Merely printing more currency notes will not make a  country wealthy.</blockquote>

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