WHAT HAPPENS WHEN A COUNTRY PRINTS MONEY?
The pictures above depict the state of Somalia which is a rare picture of what previously happened in Zimbabwe in 2008 and Venezuela. The effect of printing more money when a country must have borrowed hugely without paying back cannot be overemphasized.
The reward of printing more money according to Gresham’s law which states that ”Bad money drives out good money” is that it gives rise to hyperinflation. It can simply be put that printing money is said to be… “monetizing the debt”.
Bad money according to Gresham’s law means money that is overvalued or money that has lost its value rapidly while Good money means Money that is undervalued or money that is stable in value. Thus, the Law strongly holds that bad money chase away good money in circulation.
In 2008, when Zimbabwe was hit by hyperinflation, the prices of goods rose to 231,000,000% in a single year. Ordinary sweet which was sold before the inflation at the rate of one Zimbabwe dollar was said to have cost 231m Zimbabwe dollars a year later.
This brings us down to the nitty-gritty of this piece of write-up as the Nigerian government has obviously denied its citizenry of not printing out any money. Yet, the rate of Naira to Dollar as of yesterday (When this article was published) was exchanged at ₦495 per dollar.
This already denied monetization of debt’’ by the federal government has miraculously, but unfortunately increased our inflation rate and this makes one wonder what would be the fate of this great ‘Giant of Africa’ in years to come.
It makes me wonder if we are on a road trip ironically described by the picture above or just taking a leap of faith. Whichever path we follow, I pray it leads us HOME.
AUTHOR: ISAACOED BUCHI JAMIE