Is there a limit to the amount of money that an economy can to issue? A reflection on the U.S. fiscal cliff

The lack of money is a major cause of the economic problems of the nations. But money is a creation of human beings. Money has not intrinsic value but which assigned people.

The function of money is to serve as an instrument for the settlement of transactions in the economy. If the economy grows money needs also grow and vice versa, if the economy stagnates or decrease cash needs decrease.

In the modern world the only legal currency issuers are governments, states. When economic needs increase governments are forced to print more money.

It is therefore important the following question: Is there a limit to the amount of money that an economy can to issue?

The answer is no, there is no limit to the amount of money that governments can issue in their national currency.

What is the money back?

Theoretically, the national currencies of the countries are backed by gold and foreign reserves, specifically, dollars of the United States of America, which is used as a reserve currency for most countries central banks.

As such we can formulate the following questions:

What is the U.S. dollar backing?

The backing of the U.S. dollar is the people faith in the currency that is internationally accepted as payment instrument, nothing more.

What is the real value of gold?

The value of gold is relative and is also based on its acceptance as a mean of store of value and in jewelry, nothing else.

From this we can infer that the support of other currencies of other countries of the world is also the faith of the people in those currencies as a medium of exchange, nothing more.

The amount of money circulating in an economy determines the expansion or stagnation of the economy. For that reason, monetary policy is the most important instrument of economic policy.

The U.S. government prints more money to satisfy the needs of its economy and the global economy since the dollar is the international currency exchange. So it is a mistake and an exaggeration to talk about U.S. fiscal cliff.

Those who say that the United States is in a fiscal cliff are causing great harm to the reliability of the dollar as international reserve currency and payment and this and this could generate an intense global monetary crisis.

United States is not in a fiscal cliff, the government of that country is only serving the needs of its economy and the world economy.

Links:

Money is only metal and paper without intrinsic value

http://pablorafaelgonzalez.blogspot.com/2011/06/money-is-only-metal-and-paper-without.html

Fiscal deficit and size of the economy

http://pablorafaelgonzalez.blogspot.com/2011/09/fiscal-deficit-and-size-of-economy_18.html

The debt is not a problem for the United States

http://pablorafaelgonzalez.blogspot.com/2011/04/debt-is-not-problem-for-us-neither.html