discuss two obstacle that may create by money
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Answer:
The main obstacle for public money creation has already been mentioned in the previous post: the fear that the creation of money by government will lead, sooner or later, to large scale inflation. Governments, it is thought, will be unable to restrain themselves, resulting in the excess creation of money, too much money entering the economy, and inflation. We’ve already discussed how this danger can be countered: by delegating money creation to an independent monetary authority.
A bigger problem is the belief of mainstream economists and in their wake, politicians, the media and other pundits in the quantity theory of money. As said this theory parts from the premise that the existing money supply is already in balance with supply and demand. It is therefore thought that even a small increase in the money supply that’s not market driven would lead to inflation. As with much other economic theory there is no factual proof that this theory holds, on the contrary. Yet it has become economic dogma, with among its most dedicated followers the German monetary authorities. Germans in general suffer from a strong case of inflation phobia as a result of the already mentioned hyperinflation in the country in the 1920s. Hence the only goal of the German central bank and, under German influence, the European central bank is controlling inflation. By comparison the US central bank, the Federal Reserve, has a dual objective: fighting inflation and fighting unemployment.
Is it true that the risk of (hyper) inflation is higher with public than with private money creation? Historical research has shown systems based on private money creation lead to more and more severe financial and economic crises, including bouts of hyperinflation. Linking the fear of high inflation to public money creation is therefore unjustified. Which, of course, does not remove the need to structure a new monetary system in such a way that inflation is kept under control. In a system where a public monetary authority is responsible for money creation the opportunities to do so are much greater than in the current, privately managed system.
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Answer:
1. Lack of financial literacy Obstacle
2. Not budgeting Obstacle