Why can't poor countries just print more money?
Printing money doesn't mean that their wealth increases. It just devalues the money they already have. So it will just take more money to buy goods from another country. Printing money will also lead to over inflation which has its own set of problems such as:
You can't just emigrate from a country like Pakistan to the USA, Canada or Australia; they will refuse you entry to their country. E.g. for the USA, even if you're are skilled enough that an American company will hire you (which is obviously the first step – so called 'economic refugees' are sent back immediately), you're a long way from obtaining a green card. Right now, Pakistan isn't even allowed to participate in the Green Card Lottery. What you also need to consider is that the cost of living in those countries is a lot higher. There are websites, like this one which allows you to compare them between cities all over the world. So while you would earn a lot more money, you also need to spend a lot more. "&gt;If we lose our reserve currency status, we would have to pay it off with a different currency.   No, a debt that comes into being as dollar-denominated remains dollar-denominated. Reserve currency status doesn't change this.  The advantage of having the reserve currency is that other countries have a strong motive to accumulate dollars. Because of this we can pay for our imports in dollars. If we no longer had the reserve currency we would lose the ability to run a persistent trade deficit without borrowing foreign currency to do so.  To some extent this would self-correct. If foreigners no longer desired to hoard dollars, the flow of dollars back in to the US would bring down the trade deficit. Going forward, we'd have to ""live within our means"" with respect to foreign trade, funding imports with exports.  Domestically every country that has its own currency, not just the US, can use that currency to fully fund its own domestic productive capacity. Printing money doesn't make a poor country rich but it does allow any country to fully realize its own potential.  &gt;Other countries don't have the luxury of just printing out massive amounts of money to pay off their debts.  This is only true when a country borrows in a currency it doesn't issue. When a country spends in its own currency its policy space is constrained by inflation. To the extent any country uses, pegs to or borrows in someone else's currency that policy space is narrowed by the need to first borrow or earn that currency.  &gt;if the UN followed through with its suggestion to create a global reserve currency or reverted back to the gold standard  The euro shows us where that road leads. Countries that give up monetary authority give up sovereignty and when they find themselves in a situation where the monetary policy they no longer control is at odds with their needs, their economies get torn apart.  That's why one country, one currency is good policy. Stability and maximum policy space is achieved when fiscal authority, political legitimacy and monetary authority are consolidated at the same level. It's a three-legged stool that becomes a fragile balancing act when one leg is taken away.  Also, there's a whole side discussion to be had on what the alternatives are to the dollar as a reserve currency. The dollar is in that position for a reason." "The problem there is that the argument immediately turns to ""why should Podunk Town have the same minimum wage as Major City"", even though the whole idea behind tailoring MW to local economies is that places that can't support the minimum wage of an economic engine don't have to.      That's the challenge we are facing in my state and why our legislature won't let areas with higher costs of living raise the minimum wage.  Which ends up hilariously bad because the urban poor become even more reliant on public assistance which in turn costs the state more money." "Some people believe that inflation is caused by an increase in the money supply when the banks engage in fractional reserve lending. Is this correct? You are referring to the Austrian school of thought. The Austrians define inflation in terms of money supply. In other words, inflation is defined as an increase in the aggregate money supply, even if prices stay the same of fall. This is not the only definition of inflation. The mainstream defines inflation as a general increase in the prices of consumer goods. Based on the first definition, then your supposition is correct by definition. Based on the second definition, you can make a case that money supply affects prices. But keep in mind, it's just one factor affecting prices. Furthermore, economics is resistant to experimentation, so it is difficult to establish causality. Austrian economists tend to approach the problem of ""proof"" using a 2-pronged tactic: establish plausibility by explaining the mechanism, then look for historical evidence to back up that explanation. As I understand it, when there is more available money in the market, the price of goods will increase. But will a normal merchant acknowledge the increase of money supply and raise prices immediately? I posit that, in the short run, merchants won't increase prices in response to increased money supply. So, why does increased money supply lead to price inflation? The simple answer, in the Austrian school of thought, is that you have more money chasing the same amount of goods. In other words, printing money doesn't actually increase the number of widgets made. I believe the Austrian school is consistent with your supposition that prices don't increase in the short run. In other words, producers don't increase prices immediately after observing an increase in the money supply. Specifically, after the banks print more notes, where will the money be distributed first?  The Austrian story goes as follows: Imagine that the first borrower is a home constructor, and he is borrowing freshly ""printed"" money to build new homes. This constructor will need to buy materials and hire labor to build homes, and in doing so he will bid against other home constructors. The increased demand for lumber, nails, tools, carpentry, etc. will ever so slightly increase the market prices for these goods and services. So the money goes first to the borrower, but then flows also to the people selling to the borrower, and the people selling to the sellers, etc. It has a ripple effect. Who will be the first one to have a need to rise their price? These producers won't need to increase their price, but they will choose to do so if the believe that demand outstrips supply. In other words if you have more orders than you can fill, then you may post higher prices because you think consumers will tolerate the higher price.  You might object that competition deters any one producer from unilaterally raising prices, but in fact if all producers are failing to keep up with demand, then you can unilaterally raise prices because other producers don't have any excess inventory to undercut you with." I dislike reading opinion articles because most people have a construed understanding of monetary policy and macroeconomics.  I disagree completely about the Yuan possibly taking over as reserve currency. First of all, some countries use it as a reserve because they deal with china a lot and purchase a lot from china. when you purchase from china you either have to buy with Yuan or US dollar. we obviously print the dollar so we have no issue buying from them in dollar but many countries prefer to use the Yuan because they may have lower dollar reserves or its a higher transaction cost. Secondly, and probably the most important, is that China will be a failed economy/society most likely in the future. 1.5 billion people of many different ethnic groups. extreme inequality will lead to social unrest (already has). China has a lot of shit to take care of. It's quite laughable if anyone thinks the Yuan is a stable currency and can be a good reserve currency.   I posted a link for you to read if you want to understand the monetary system and what the Fed's role is. Here it is again:  http://pragcap.com/understand-the-modern-monetary-system/understanding-modern-monetary-system  read it and tell me what you think. The main driver behind countries not printing themselves out of debt is the fact that it will cripple the economy, destroy citizens savings, asset valuations and piss all the countries trade partners off so much that they may stop doing business with them.  You will have a few different extremes, look at Zimbabwe as an example of a country that just prints money like no ones business.  America is essentially devaluing its currency to compete with China. That annoys the Chinese because their holdings are devalued and as such you then see people moving away from US treasuries into more stable commodities and currencies. "Well, first off - yes, every year the younger generation grows up but remember that the older generation also dying off/leaving the market place. Also, what happens if the younger generation can't take up enough debt in order to pay for previous commitments?  Secondly, I think you're confusing the money supply with actual production. The two are pretty much divorced from each other - money doesn't require a ""resource"" per se (at least, not since leaving the gold standard), it just requires that someone is able/willing to take on debt. For example, every time you take a loan out from the bank, you are effectively creating money. This is called bank credit and if you live in a country that uses fractional reserve banking then it makes up a very large part of your money supply (think like up to 95%). When bank's create money, they only create the principle amount (ie. the original loan amount) and not the interest amount as well. This means that someone else needs to take out a loan so that you can repay the amount in interest that you owe on your new loan. This doesn't normally affect you because there are lots of people taking out lots of loans all the time and money is circulating around in the economy. The problem is that eventually the system gets to a stage where people can't really take out loans any more, they just have too much debt, and so you end up with a liquidity crisis like in 2008.   So what I was saying is that either I'm missing something pretty obvious and I've got this wrong or this is exactly how it works and economists like to just ignore it for the benefits that it offers..." I think you are asking a few questions here. Why is gold chosen as money? In a free market there are five characteristics of a good money: Gold and silver meet all five characteristics.  Diamonds are not easily divisible which is why they are not normally used as money.  Copper, Iron, and lead are not scarce enough - you would need a lot of these metals to make weekly or daily purchases.  Paper is also way too plentiful to be used as money. By the way, historically silver has been used for money more than gold. How does international trade work with gold as money (is this what you are asking with your hypothetical example of 10 countries each with y amount of gold?) Typically a government will issue a currency that is backed by gold.  This means you can redeem your currency for actual gold.  Then when an American spends 5 US dollars (USD) to purchase a Chinese good the Chinese man now owns 5 USDs.  The Chinese man can either redeem the 5 USD for gold or spend the 5 USD in the US.  If a government issues more currency then they have gold for then the gold will start to flow from that country to other countries as the citizens of the other countries redeem the over-issued currency for gold.  This outflow of gold restricts governments from over-issuing paper currency. Who creates the procedures and who supervises them in modern worldwide economy? The Federal Reserve, IMF, and Bank of International Settlements all are involved in the current system where the US dollar (see Bretton Woods agreement) is the reserve currency used by central banks throughout the world.  Some think this system is coming to an end.  I tend to agree.