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Why can't the government just print more money to get out of debt?

National Debt Glossary: Key terms for understanding America's financial crisis


First of all, the federal government doesn't create money; that's one of the jobs of the Federal Reserve, the nation's central bank.

The Fed tries to influence the supply of money in the economy to promote noninflationary growth. Unless there is an increase in economic activity commensurate with the amount of money that is created, printing money to pay off the debt would make inflation worse. This would be, as the saying goes, "too much money chasing too few goods."

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SOURCE: Federal Reserve Bank of New York

 

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