DIRECT MONETIZATION

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 Printing of the currency has its association with the increase in inflation.  Because if everyone has more money, prices go up instead. Increasing demand  will increase the rate of inflation over time .  

This happened recently in Zimbabwe, in Africa, and in Venezuela, in South America, when these countries printed more money to try to make their economies grow.

Monetizing the deficit is when the RBI directly purchases government bonds (G-Secs) from the primary market to help the Centre’s expenditure. In turn, the RBI prints more money to finance this debt. In other words, monetization of deficit happens when RBI buys government securities directly from the primary market to fund government’s expenses.

When the printing of currency for a longer period of time, resulted into the “hyperinflation”. 

When Zimbabwe was hit by hyperinflation, in 2008, prices rose as much as 231,000,000% in a single year. 

To get sustained , a country has to make and sell more things – whether goods or services. This makes it safe to print more money, so that people can buy those extra things. 

When a country prints more money without making more things, then prices just go up.

No one is making any more of these models. So even if everyone gets more money to spend, it won’t mean that more people can afford to buy them. The sellers will just put the price up. 

At the moment, USA can  sustain the  printing of its currency . Because the demand of dollar is usually very high because of its importance in international trade.

Most of the valuable things that countries around the world trades, including gold and oil, are priced in US dollars. Full article is available on https://upsconline.com/direct-monetization/ 

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