When you were an innocent child, have you ever wondered where does money came from? I bet that upon stumbling to the truth that it is your government that created them you asked many different mind boggling questions. And I guess you asked these questions. If the government prints money, then why not print as many as they can to pay all government debts?Why borrow money from foreign entities if a sovereign state can print its own money? Why not just print to fund government projects? Why not just print to give it to the poor to help them be uplifted from poverty? Well today you will have the answer to your questions.

Looking back at the 1920’s, after World War 1, the German people were forced to pay a large amount of money to the allies as war reparations. The allies demanded that World War 1 reparations were to be settled in gold or foreign currency to be paid in installment. It can be remembered that John Maynard Keynes, the father of modern economics, objected to this oppressive demands because he knew what catastrophe it will bring to the German currency and economy. In order for the German government to pay the said amount, since reparations are to be paid in gold and foreign currency, they massively printed large volume of bank notes which will be used to buy foreign currency and gold. What is the end result? The German Marks devaluated where in a single dollar is worth 4,210,500,000,000 German marks. The US Dollar – German Marks exchange rate is so high that a single Marks is of no value at all.

Another case but of different story also happened in the pacific. It was during World War 2 when imperial Japan invaded the Philippines. It took the Japanese Army months to make the Philippines surrender. During the invasion, the Japanese Government made the Philippine a puppet state. They made a puppet government for the Filipino people. Moreover, the Philippine banknotes were replaced by new Japanese made banknote for the Filipino people that will sooner be named as the Mickey Mouse money. So, how did it end up being called the Mickey Mouse money? According to some account, people going to the market would bring a bayong (native bags made of woven coconut or buri leaf strips) overflowing with Japanese-issued bills because a single box of match would cost 100 Mickey Mouse money. It will need you a plenty of Mickey Mouse money just to buy goods.

[image source](http://www.amusingplanet.com/2017/12/the-german-hyperinflation-of-1923.html)

Money is an instrument. It is just a paper at all created to be use as a medium of exchange, store of value, standard of deferred payment and etc. Just like commodities, money is created depending upon the demand of the economy; and this is where the supply and demand of money enters the scene.

When the economy is expanding the demand for money increases. To balance everything the government in turn either print money to supply the need of an expanding economy to avoid shortage of money, or use a contractionary economy policy by increasing taxes, lessening government spending, increasing interest rates and the likes, to lessen the demand for money. Moreover, when the economy is suffering recession money is used to bolster it back to normal, using fiscal policies like lowering taxes, lowering interest rates, and increase government spending just like what the US government did during the great depression. US government injected Billions of dollars into the economy and lower taxes in order for the people to recover from the devastation the economic depression had caused them. Therefore, we can say that money is used to regulate the economy as a whole, expanding and contracting it, and in curbing unemployment.

In addition, money is tied up with price levels. When there is plenty of money in the economy, the tendency of rapid increase in general prices is high. Same is true when there is a shortage of money circulating in the economy, the tendency of decrease of general prices of commodities might happen. Money is somewhat a regulator of inflation and deflation.

What happened during the German Hyperinflation and Japanese Mickey Mouse money is a result of an unregulated supply of money. The Germans fight fire with fire. When their money devaluate, that their money cannot buy foreign currency anymore, they printed and printed more money with higher denominations to cope up with their devaluing Marks. But, remember that too much supply of money results to inflation or devaluation of money. The result of their too much money supply in the economy ended up with the Marks becoming worthless. A single US dollar for a 4.2Trillion Marks, that is the exchange rate during that time. Same is also true with the Japanese Mickey Mouse money. They injected enormous amount of money in the economy when there is no need for such large volume of supply. In order to balance everything prices has to go up and that is why people need a wheelbarrow filled with money just to buy a single bread.