Inflation

How does a currency become worthless?

Well, of course, it begins with inflation.

The government starts printing money in order to cover its excessive expenditures or shortfalls.

Simply put, the government is taking in less money than it needs to dish out.

Now, there are any number of reasons why this is happening.

Number one. Taking in less money.

In the case of Sri Lanka recently, the government was taking in less money because, they made a stupid bet on green fertilizer which reduced crop yields.

Reduced crop yields produces less crops sold, and that produces less government tax money.

At the same time, the Covid 2020 pandemic was taking place, and that caused a decrease in tax remittances, which is what workers contribute to the government by working abroad. Since governments had shut their borders during the pandemic, it was more difficult for Sri Lankans to work abroad. In addition to that, tourism, which was a big income generator in Sri Lanka, had fallen off .

This led to a massive decrease in government revenues.

Number two. An increase in expenditures can occur when governments have to pay huge debt loans to international lending bodies like the IMF.

Governments (except for the US) can’t print their way out of this debt service because they have to pay the money back the debt in dollars.

Number three. Huge expenditures can also result from graft and corruption, in which greedy leaders siphon out billions from the national treasury.

That is what happens in a lot of Third World countries. The corrupt leadership steals much of the money in the treasury for themselves, then finds itself short, when it comes to paying government workers , pensioners, and military personnel.

In the United States, the leaders are more subtle. They create wars abstract and physical that are supplied by companies that the leaders own – with a nice cut for the owners.

When you put all these together, there ensues a massive shortfall between what government workers in the country expect and what the government takes in.

This presents a problem for the government as workers generally don’t like to be paid less.

Unemployed workers or workers making less money tend to rebel.

Think France.

Because of this shortfall, the government, then resorts to printing money. Of course, this is only a stop-gap measure. It is not a long-term solution.

Unfortunately, bad habits, die hard. The leaders of the country who are stealing, can’t get off their habit. They continue to steal.

For them, stealing is like an addiction. They don’t need the money. They are just addicted to stealing.

Meanwhile, the workers continue to get paid. The money that is borrowed from the IMF usually goes to paying those workers so that they don’t rebel.

Additionally, because the leaders are so incredibly corrupt, they generally don’t institute any long-term measures to improve the economy;; therefore, the outlook for that economy is as bleak as it always was.

The cycle repeats itself endlessly.

The inflation grows and grows until the people begin to abandon the currency. They start to trade in dollars, gold, or even Bitcoin. Pretty soon no one wants the native currency anymore and this is what causes a massive escalation of inflation.

The currency becomes worthless because people don’t want it anymore.

In fact, it gets to the point where you can’t pay them to take it.

This is what happened in post World War I Germany

This is what is happening in Argentina today.

The inflation becomes like a tornado, which takes on a life of its own causing massive destruction in society.

There is almost no stopping it.

Sincerely,

Archer Crosley

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