Let's say this pizza represents the money supply of a country. The total money supply represents the total purchasing power of all the money held by the country's citizens, companies, organizations, and government agencies.
Now that country has a central bank empowered with printing and controlling the money supply. Let's say the country's economy is a little stagnant and elections are approaching. The administration wants to spruce things up. So they get the central bank to double the money supply and make it available to all the retail banks to double the account values, thinking people will have more money to spend. (This is not how it works. Banks don't just put free money in people's accounts. Not yet anyway. Its just an illustration to explain a point.)(Update from this morning. I learned during the day today Hong Kong is actually doing this. The Chinese government is planning to give every adult resident $1,284; see https://www.bloomberg.com/news/articles/2020-02-25/hong-kong-set-for-budget-deficit-amid-unrest-virus-outbreak)
So while the total purchasing power remains the same, the number of currency units, let's call them dollars, doubles. Initially, people are thrilled they have twice the money they did the day before. But very soon the prices for things double and spending trails off and things get stagnant again.
So the central bank doubles the money supply again. Now what used to cost $1 costs $4. Any stimulus to the economy quickly trails off.
Double it again. There's no reason the money printing will increase the total purchasing power of the country. But now what used to cost $1, costs $8. So each dollar now has 1/8th the purchasing power or 12.5 cents.
People who saved their money from before the money printing started now have a problem. Their $100 dollar bills have lost $87.50 (100-12.50) of purchasing power. So a lottery ticket that used to cost $1, now costs $8.
This process cannot bring prosperity. If it could, every country would have been doing it since before you were born.
1913 is when the Federal Reserve was given control over the US banking system, including management of the US Dollar. The dollar has lost over 96% of its value. That means today's dollar would be worth less than 4 cents back in 1913. Here, see for yourself:
This shows a 1913 dollar is worth 3.98 cents in Jan. 2020. This is from the Federal Reserve Bank of St. Louis.
This shows the same thing rounded up to the nearest penny. This is from the U.S. BUREAU OF LABOR STATISTICS.
Why would the government do this? In my opinion its to pay off debt with cheaper dollars in the future. The other choice would be to raise taxes to a crazy level or just outright confiscate a percentage of citizen's bank accounts, known as a "Bail-In" and has already happened in several countries in recent times. (See https://www.forbes.com/sites/nathanlewis/2013/05/03/the-cyprus-bank-bail-in-is-another-crony-bankster-scam/#306e50762685).
The last 2 methods would get every politician ousted at the next election cycle, so they tell us 2% inflation is a good thing and go with the devaluation plan as long as they can.
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