🇺🇸 𝗠𝘆̃ 𝗰𝗼́ 𝗺𝗮́𝘆 𝗶𝗻 𝘁𝗶𝗲̂̀𝗻, 𝗰𝗮́𝗰 𝗾𝘂𝗼̂́𝗰 𝗴𝗶𝗮 𝗸𝗵𝗮́𝗰 đ𝗲̂̉ 𝗰𝗼́ 𝘁𝗵𝗲̂̉ 𝗶𝗻 𝘁𝗶𝗲̂̀𝗻, 𝘃𝗮̣̂𝘆 𝘁𝗮̣𝗶 𝘀𝗮𝗼 𝗸𝗵𝗼̂𝗻𝗴 𝘁𝘂̛̣ 𝗶𝗻 𝘁𝗶𝗲̂̀𝗻 𝗺𝗮̀ 𝗹𝗮̣𝗶 đ𝗶 𝘃𝗮𝘆 𝗰𝗮́𝗰 𝗾𝘂𝗼̂́𝗰 𝗴𝗶𝗮 𝗸𝗵𝗮́𝗰 đ𝗲̂́n 𝗺𝘂̛́𝗰 𝗻𝗼̛̣ đ𝗮̂̀𝗺 đ𝗶̀𝗮?
If printing money could solve the problem, then I think Mugabe, a long-time friend of the Vietnamese people who won the Nobel Prize in Economics, would have long made Zimbabwe the most powerful country in the world. Just because Mugabe printed money indiscriminately, from 1 Zimbabwe dollar could buy 1 loaf of bread, but after ten years the people of Zimbabwe wanted to buy 1 loaf of bread, they had to carry a carload of money.
𝗧𝗮̣𝗶 𝘀𝗮𝗼 𝗰𝗵𝘂́𝗻𝗴 𝘁𝗮 𝗽𝗵𝗮̉𝗶 𝘃𝗮𝘆 𝘁𝗶𝗲̂̀𝗻 𝘁𝘂̛̀ 𝗰𝗮́𝗰 𝗻𝘂̛𝗼̛́𝗰 𝗸𝗵𝗮́𝗰?
- The money borrowed here is not ordinary money, but "US dollars."
- Why borrow dollars?
- Because we cannot print US dollars!
I was just joking.
The US dollar is a strong international currency; it is considered "international currency." This means that if you have US dollars in your wallet, you can spend them in almost every country.
Let me tell you a story.
After World War II, the world suddenly became flat like a sheet of paper. Along with the rapid development of society, the earth has become a large "village."
In this village, the family of the man named Nga specializes in producing sickles as tools of labor, Mr. Mỹ's family specializes in producing BCS for family planning, Mr. Trung's family mainly sews clothes, Mr. Đức's family manufactures auto parts, Ms. Pháp's family specializes in producing perfumes, and Ms. Việt's family mainly grows rice.
Countries are like each family.
Each family wants a better life, so they have to buy goods from other families; this buying is what economists call "imports."
If you want to buy something from someone else, you need to use a medium to purchase it. So what is that medium? The golden answer is the best. But gold is a very precious metal. If only you buy a BCS to use tonight, you would only spend a gold flake the size of a needle tip; it is too difficult to break that gold flake to pay Mr. Mỹ's family. On the other hand, gold is also very heavy. For example, one morning you want to go to Mr. Mỹ's house to buy a luxury car, then you drive around to Mr. Trung's to buy a dozen designer outfits, to Mr. Nga's for many sickles, to Ms. Pháp's to buy a dozen precious perfumes for your wife and lover, and then back to Ms. Việt's house to buy some rice. At that time you must carry gold to pay. But gold is too heavy; the weight of gold can crush you, so it will be very inconvenient. Who knows, while carrying the gold, you might drop it, and you could break your leg and need to be hospitalized for us to perform surgery.
Suppose you take some papers, draw a portrait of your ancestor, add more beautiful details, and then write on them that this note is worth this much gold, that note is worth that much gold; you take those papers to families to buy things, no one will agree because they are just worthless scraps of paper to them.
But for the man named Mỹ, who was both the strongest, handsomest and richest in the village, it was completely different. He chose a beautiful day to declare: “My dear friends! From now on, you can use the money I print to spend, I call this money US dollars with the portrait of my ancestor. Don’t worry, all the money I print is related to gold!”
Since then, the purchase of goods between families, also known as importing goods, all countries use US dollars.
𝗡𝗲̂́𝘂 𝗰𝗵𝘂́𝗻𝗴 𝘁𝗮 𝗸𝗵𝗼̂𝗻𝗴 𝗰𝗼́ đ𝗼̂ 𝗹𝗮 𝗠𝘆̃, 𝗰𝗵𝘂́𝗻𝗴 𝘁𝗮 𝗰𝗼́ 𝘁𝗵𝗲̂̉ 𝘁𝘂̛̣ 𝗶𝗻 𝘁𝗶𝗲̂̀𝗻, 𝗿𝗼̂̀𝗶 𝗱𝘂̀𝗻𝗴 𝘁𝗶𝗲̂̀𝗻 𝗮̂́𝘁 𝗺𝗮̀ 𝗺𝗼̣̂𝘁 𝗰𝗵𝗶𝗲̂́𝗰 𝗵𝗮́𝗻𝗴 đ𝗼̂𝗻𝗴 𝗰𝗼́ 𝗴𝗶́ 𝗯𝗮𝗼 𝗻𝗵𝗶𝗲̂𝘁?
The answer is no.
Because the dollar was supported by the strongest household in the village, that is the family of the man named Mỹ, everyone trusted this man, so they only accepted dollars, not other currencies. In fact, there were still other currencies like Euro, RMB, etc., but they were only spent within each clan that accepted them; economists call that a regional common currency.
One day, Ms. Việt used the dollars she had saved to buy a car. The dollars were gone, but she needed to buy some sickles. So what should she do? She could buy the sickles from Mr. Nga on credit or borrow money, thereby becoming a debtor.
In other words, unless a "family" has no connection with other "families" and develops independently, whether they have US dollars or not does not matter, and they do not need to borrow money.
However, the village exists under certain objective conditions that prevent some families from living independently. For example, Mr. Đức only produces cars but does not grow rice; if he does not buy rice from Ms. Việt or other families, he will have no food to eat, and his wife and children will starve while looking at the cars. Similarly, if Ms. Pháp does not import clothes from Mr. Trung's family, she will definitely have to go naked; other families will not consider her a human being anymore, because only animals do not wear clothes. If Mr. Đức wants to import food, he must use dollars, and if Ms. Pháp wants to import clothes, she must also use dollars. If Mr. Đức and Ms. Pháp do not have dollars at home, they must borrow dollars or buy on credit converted into dollars, but they cannot print dollars themselves because Mr. Mỹ does not allow printing his family’s money.
"𝐺𝑖𝑎 đ𝑖̀𝑛ℎ" 𝑚𝑎̀ 𝑡𝑜̂𝑖 đ𝑒̂̀ 𝑐𝑎̣̂p 𝑜̛̉ 𝑡𝑟𝑒̂𝑛 𝑙𝑎̀ 𝑚𝑜̣̂𝑡 𝑞𝑢𝑜̂́𝑐 𝑔𝑖𝑎. 𝐶𝑎́𝑐 𝑏𝑎̣𝑛 đ𝑎̃ 𝑡ℎ𝑎̂́𝑦 𝑟𝑎̂́𝑡 𝑟𝑜̃ 𝑟𝑎̆̀𝑛𝑔, 𝑛𝑒̂́𝑢 𝑘ℎ𝑜̂𝑛𝑔 𝑣𝑎𝑦 𝑡𝑖𝑒̂̀𝑛, đ𝑎̂́𝑡 𝑛𝑢̛𝑜̛́𝑐 𝑠𝑒̃ 𝑝ℎ𝑎́ 𝑠𝑎̉𝑛, 𝑡ℎ𝑎̣̂𝑚 𝑐ℎ𝑖́ 𝑛ℎ𝑖𝑒̂̀𝑢 𝑛𝑔𝑢̛𝑜̛̀𝑖 𝑠𝑒̃ 𝑐ℎ𝑒̂́𝑡.
A country can print money, but when buying goods from other countries, the country that sells the goods will not recognize the self-printed currency, so families without dollars can only borrow US dollars.
If a country has many export items, that country will earn many dollars; this is called "foreign currency earned from exports." That country has people working abroad, who can send dollars back home, which is also a way to earn foreign currency for the country. The amount of US dollars a country currently has is called "US dollar foreign exchange reserves."
𝐷𝑜 đ𝑜́, 𝑘ℎ𝑖 𝑥𝑒𝑚 𝑥𝑒́𝑡 𝑘ℎ𝑎̉ 𝑛𝑎̆𝑛𝑔 𝑝ℎ𝑢̣𝑐 ℎ𝑜̂̀𝑖 𝑘𝑖𝑛ℎ 𝑡𝑒̂́ 𝑐𝑢̉𝑎 𝑚𝑜̣̂𝑡 𝑞𝑢𝑜̂́𝑐 𝑔𝑖𝑎, "𝑑𝑢̛̣ 𝑡𝑟𝑢̛̃ 𝑛𝑔𝑜𝑎̣𝑖 ℎ𝑜̂́𝑖 𝑏𝑎̆̀𝑛𝑔 đ𝑜̂ 𝑙𝑎 𝑀𝑦̃" 𝑙𝑎̀ 𝑚𝑜̣̂𝑡 𝑐ℎ𝑖̉ 𝑠𝑜̂́ 𝑟𝑎̂́𝑡 𝑞𝑢𝑎𝑛 𝑡𝑟𝑜̣𝑛𝑔, 𝑡𝑢̛𝑜̛𝑛𝑔 đ𝑢̛𝑜̛𝑛𝑔 𝑣𝑜̛́𝑖 "𝑡𝑖𝑒̂̀𝑛 𝑔𝑢̛̉𝑖 𝑞𝑢𝑜̂́𝑐 𝑡𝑒̂́" 𝑐𝑢̉𝑎 𝑚𝑜̂̃𝑖 𝑞𝑢𝑜̂́𝑐 𝑔𝑖𝑎.
I give an example; the financial crisis in Hong Kong in 1997, thanks to huge foreign exchange reserves, China has overcome the crisis, and the international financial system has not collapsed.
Currently, China has the highest foreign exchange reserves with 3.5 trillion dollars, Japan is second with 1.4 trillion dollars, and Switzerland is third with 1 trillion US dollars.
𝗠𝗼̣𝗶 𝗾𝘂𝗼̂́𝗰 𝗴𝗶𝗮 đ𝗲̂̀𝘂 𝗰𝗼́ 𝗺𝗮́𝘆 𝗶𝗻 𝘁𝗶𝗲̂̀𝗻, 𝘃𝗮̣̂𝘆 𝗰𝗼́ 𝘁𝗵𝗲̂̉ 𝗶𝗻 𝗺𝗼̣̂𝘁 𝗹𝘂̛𝗼̛̣𝗻𝗴 𝘁𝗶𝗲̂̀𝗻 𝗹𝗼̛́𝗻 đ𝗲̂̉ 𝘀𝘂̛̉ 𝗱𝘂̣𝗻𝗴 𝘁𝗿𝗼𝗻𝗴 𝗻𝘂̛𝗼̛́𝗰 𝗸𝗵𝗼̂𝗻𝗴?
Any modern country has the right to print money, and the authority that has this power is the "central bank."
Most central banks are controlled by the government, only a few are not. For example, the Federal Reserve is the central bank of the United States, but the US government cannot control it. One of the reasons Kennedy was assassinated was to regain the right to print money, which means the US government controls its central bank. Trump also wanted to regain the right to print money, which is why he was determined to disclose the evidence of the assassination of Kennedy, initially planned to have 80,000 pages of documents. But surprisingly, the evidence of the Kennedy assassination that Trump obtained totaled 11.5 million pages, exactly 1 km long, so Trump could read for a lifetime and still not finish it.
𝑀𝑜̣̂𝑡 𝑞𝑢𝑜̂́𝑐 𝑔𝑖𝑎 𝑏𝑖̀𝑛ℎ 𝑡ℎ𝑢̛𝑜̛̀𝑛𝑔, 𝑙𝑖𝑒̣̂𝑛 𝑐𝑜́ 𝑡ℎ𝑒̂̉ 𝑡𝑜𝑎̉𝑖 𝑚𝑎́𝑖 𝑖𝑛 đ𝑜̂̀𝑛𝑔 𝑡𝑖𝑒̂̀𝑛 𝑐𝑢̉𝑎 𝑚𝑖̀𝑛ℎ, 𝑖𝑛 𝑘ℎ𝑜̂𝑛𝑔 𝑔𝑖𝑜̛́𝑖 ℎ𝑎̣𝑛 𝑘ℎ𝑜̂𝑛𝑔? 𝐶𝑎̂𝑢 𝑡𝑟𝑎̉ 𝑙𝑜̛̀𝑖 𝑡𝑎̂́𝑡 𝑛ℎ𝑖𝑒̂𝑛 𝑙𝑎̀ 𝑘ℎ𝑜̂𝑛𝑔.
Let me continue the story.
In that village, Mr. Đức's family produced 3 cars, Mr. Nga produced 10 sickles, Mr. Trung produced 30 sets of clothes, Ms. Pháp produced 4 bottles of perfume, and Ms. Việt grew 1 ton of rice. The whole village has 100,000 banknotes of 1 dollar being used.
Mr. Kẹ Mỹ is the village chief, so he has the right to print money.
To increase his personal wealth, Mr. Kẹ Mỹ secretly printed another 100,000 banknotes. In the beginning, Mr. Mỹ kept the newly printed $100,000 at home, never using it, so the village had no issues.
But one day, Mr. Kẹ Mỹ told 5 people in the village that after work each day, they could come help him build a house, and each time they came, he would give them 1,000 dollars. All 5 people happily came to help and received money. Three weeks later, Mr. Kẹ Mỹ distributed all 100,000 dollars, so he told them not to come anymore.
Because earning a large amount of money, Ms. Việt began to think about beauty, so she bought 10 sets of clothes, but the accumulated money from before and the money Mr. Mỹ just distributed was still a lot, so she decided to buy a car. She went to Mr. Đức's house, but the car was sold out, only one left, and Mr. Trung had just arrived to buy it, so that car's price was doubled by Mr. Đức.
Goods in the village doubled.
As a result, the money in the people's pockets depreciated, prices became extremely high, and the villagers faced difficulties in making a living.
Mr. Mỹ looked at the people in the village and asked: "Prices have gone up, huh?" Everyone replied that prices were too high, they couldn't shop anymore because they had no money. Seeing that everyone had no money, Mr. Mỹ returned to continue his money printing work, day by day he printed more and distributed it to everyone. He thought that when people had more money, they would be able to shop more easily.
Unexpectedly, the continuously printed money lost value, prices increased several times, then dozens of times, even hundreds of times compared to before, leading to serious inflation.
The story of Zimbabwe is an example.
When talking about the currency of Zimbabwe, which is compared to flowing like a flood, we must first mention an old friend of the Vietnamese people, named Mugabe.
Mugabe was a man who loved to read.
After completing many degrees in South Africa, Tanzania, Zambia, and many other countries, Mugabe returned to be a high school teacher. In 1963, he joined and founded the Zimbabwe African National Union (ZANU), which defeated ZAPU in the 1960s and 1970s and became the ruling party after Zimbabwe gained independence in 1980.
From 1963 to 1975, Mugabe was an elite son of the Zimbabwean nation, so he was held by the British colonial government. During this time, he took advantage of reading many books, and he also obtained a master's degree in law and public administration from two British universities. I don't remember the specific universities, but those interested can find out; in short, Mugabe was a very studious person. An interesting point I discovered is that those who often speak out against the government or undermine the country often study economics or public administration in the West; America and the West mainly train in these two fields and social sciences; they do not train for countries with different ideologies in technical fields.
In 1980, Zimbabwe gained independence, and Mugabe became the Prime Minister and held power. In 1987, the cabinet system was transitioned to a presidential system, and Mugabe became president until he was forced to resign in 2017 at the age of 93. Throughout those 37 years, Mugabe held absolute power; the "book-loving" president turned the Zimbabwean currency into a legendary trash.
Zimbabwe in the 1980s was a country with a diverse economic structure, agricultural production accounted for 12.2% of GDP, high industrialization level, making it a typical industrialized country. It can be said that Zimbabwe was very rich; the number of skyscrapers was the dream of Beijing and Shanghai, and Southeast Asian countries could only look on enviously. At that time, people in Asia had to choose a country to stay in; if they could not go to the United States or Europe, they would hurriedly choose Zimbabwe.
The turning point began at the end of 1997 when veterans took to the streets to protest, demanding Mugabe implement the post-war subsidies he had promised. At that time, the central bank of Zimbabwe was suffering from a large debt. To pay the subsidy of 50,000 Zimbabwe dollars for each person, Mugabe, a man with a master's degree in law and public administration from the UK, believed that the problem could easily be solved by printing money.
Right after the veterans were awarded money, prices began to rise; the more money was printed, the less the people had to buy goods. Mugabe believed that printing money, printing more money was obvious; the more money printed, the poorer the country became.
What should Zimbabwe do when its people are poor?
The only answer at that time was to continue printing money; printing money would make the people and the government feel richer, but the money the people used to buy a pair of pants in the morning was no longer enough to buy a pair of shorts in the afternoon.
In 1980, the exchange rate was 1 US dollar could only be exchanged for 0.678 Zimbabwe dollars. In 1997, the exchange rate was 1 US dollar could only be exchanged for 10 Zimbabwe dollars. In June 2002, 1 US dollar could be exchanged for 1,000 Zimbabwe dollars. By 2006, 1 US dollar could be exchanged for 500,000 Zimbabwe dollars. The inflation rate in Zimbabwe was 55% in 2000, 133% in 2004, 586% in 2005, and 220,000% in the summer of 2008. By 2009, the inflation figure became uncountable with zeros behind it. After Mugabe was overthrown, the inflation figure announced by the new government was 5,000,000,000,000%. In 2009, the fourth-generation Zimbabwe dollar was exchanged for 1 trillion third-generation Zimbabwe dollars; in 2008, the third-generation Zimbabwe dollar was exchanged for 10 billion second-generation Zimbabwe dollars; and in 2006, the second-generation Zimbabwe dollar was exchanged for 1,000 first-generation Zimbabwe dollars. To make a rough calculation, if you had one Zimbabwe dollar in 2009, you could exchange it for 1,000,000,000,000,000,000,000,000,000,000,000,000 dollars in 2006. In Zimbabwe, to buy a loaf of bread, people had to pull a cart to carry money.
𝗩𝗮̣̂𝘆 𝗺𝗼̂̃𝗶 𝗾𝘂𝗼̂́𝗰 𝗴𝗶𝗮 đ𝘂̛𝗼̛̣𝗰 𝗶𝗻 𝗯𝗮𝗼 𝗻𝗵𝗶𝗲̂𝘁?
First of all, we must understand that the nature of money is also a type of commodity. In primitive times, some tribes used shells as currency. Later, people used precious metals like gold and silver as currency. After that, paper money was born. Because it is backed by national credit, it has value and can still be considered a type of commodity. As a means of storage, price scale, and medium of circulation, it is widely recognized by everyone and thus is called currency.
Since money can be considered a type of commodity, it must face the problem of its price being determined by the market.
Money also has a price. For example, 1 dollar in America can buy 1 egg, so anyone in America can say that American eggs are priced at 1 dollar. Obviously, 1 dollar in Vietnam can buy 5 eggs, which is worth more than 1 dollar in America that can buy 1 egg. This is precisely the question of "does money have value?"
What factors determine the value of currency?
The short answer is, like all other commodities, it is determined by supply and demand.
If Ms. Việt raises chickens that lay eggs and is the only one supplying eggs to the whole village, then Ms. Việt must calculate the appropriate number of eggs to supply each year. If she supplies too few eggs, prices will rise, and no one will buy, leading to low revenue. If there are too many eggs, buyers will not finish, and egg prices will be too cheap, and she will not sell.
The same principle also applies to printing money.
When the money supply is too much, the value of the currency decreases. When the money supply is too low, the value of the currency increases. The issue of currency and eggs is slightly different in that, as a businesswoman, Ms. Việt's ultimate goal is to make money. Therefore, if Ms. Việt monopolizes the egg supply market, she has reasons to raise egg prices by raising fewer chickens to earn more profit with less effort. However, the purpose of issuing currency as a commodity is not to "make money" but to maintain normal operations of the economic system. Therefore, for a country, the most beneficial money supply is essentially the equilibrium point achieved between the demand and supply of money, calculated according to the formula in finance textbooks, so I won't mention it anymore.
𝗛𝗼𝗮 𝗞𝘆̀ 𝗰𝗼́ 𝘁𝗵𝗲̂̉ 𝗶𝗻 𝗺𝗼̣̂𝘁 𝗹𝘂̛𝗼̛̣𝗻𝗴 𝘁𝗶𝗲̂̀𝗻 𝗹𝗼̛́𝗻 𝘃𝗼̂ 𝘁𝗵𝗼̛̀𝗶 𝗵𝗮̣𝗻 𝗸𝗵𝗼̂𝗻𝗴?
There is no doubt that the United States is the only country in the world that can print more money. Why is that? Because American paper money is used globally, so the consequences of their excessive currency issuance will be borne by the whole world.
America prints and distributes money in three steps.
- The first step is the Federal Reserve must print money.
- The second step is to spend money through defense spending, public spending, etc. As a result, some of America's import-export companies, large multinational corporations, and multinational military companies will profit. These companies will conduct global purchases and pay other countries in US dollars.
- The third step is that foreign organizations receiving US dollars will spend this money on purchases abroad, thereby forming the flow of US dollars.
Americans call this "quantitative easing policy." With this trick, Americans often print more money and let the world pay, wealth flows back to America.
So, can the United States print unlimited amounts of money? Of course not. Because if printing money indiscriminately like that, everything will become a big mess. The logic of the problem I mentioned above. If the United States prints too much money, the dollar will depreciate rapidly and even cause global inflation; in this case, the United States will also run into trouble.
The United States only prints money within the range that global inflation can accept.
That is precisely the reason, although the United States holds the power to print money for the whole world to spend, this country is the most indebted, and the policy of "mutual benefit" will come with purchasing the "century debt" of the United States.
Source collection.
