Inflation and deflation

What is the difference between real money and a piece of paper? What makes paper valuable by turning it into money?

It is the printing of money by states and declaring it as the official currency. This ensures that the redeemable paper is official and legal.

What makes money valuable is related to how many of them there are, supply determines value. States decide how much money will be in circulation and how much money will be printed.

Although the central banks of the countries are independent institutions, they always feel the pressure of the politicians in the state administrations. Although the decision maker appears to be the central bank, it is often the people who actually run the countries.

Why don't central banks make everyone rich by printing money day and night? Because when central banks are constantly printing money, the money printed has no value.

Since we think of money as purchasing power and pay for the services we need, when the money supply circulating in the market constantly increases and exceeds the purchased goods, prices rise regularly and inflation occurs.

While the amount of money in circulation remains the same, a continuous surplus in production and the increase in goods and services that turn the wheels in the economy create deflation. This causes unemployment and shrinkage of economies over time.

According to many economists, excess inflation and deflation are harmful for economies and there is an opinion that the equilibrium policy should favor a small and non-increasing inflation. This causes a steady rise in the economy.

Central banks manage monetary and economic policies, they have to show their money in order to print money. This is more related to the gold reserves that central banks have. As the gold reserve increases, the amount of money in circulation can also increase.

Central banks use some data to determine the amount of money that should circulate in the market. These can be listed as inflation figures of previous years, unemployment rates, figures in production and economic growth data. In order to create a healthy economy and not to cause consequences that may directly affect societies such as unemployment and inflation, it is necessary to use this data correctly and to adjust the amount of money in circulation.

From a broader perspective, central banks don't just print money, they manage money and are effective in determining the value of the money we hold. It is effective not only in determining the value of money, but even in finding the job before that money is earned and before the stage of earning it.

Even the example of the last season of La Case De Papel is proof of how important the reserves of central banks are. Central banks are the economic heart of a country, every decision made affects the entire community. Although the political pressures on them are discussed in each country, central banks are independent and heavy responsibilities.

Thank you for reading.