Many governments and central banks have committed a lot of fresh money towards the economy. But where is this money from? And how does this affect the value of existing money?
Basically when you create new money in a system you decrease the value of the existing money. When you go to use money after a big round of creation, you might find that people want more of it to swap for goods and services.
Basically you water it down by creating more.
Is this bad?
Well this has been going on for a while. At the end of the day people will still want to buy and sell goods and services. As long as the change in money is at a sensible pace things can continue.
Money creation does encourage certain behavior. Namely if money is losing value, it is a better idea to not hold a lot of it. In fact negative money seems to become more fashionable. (This is coming from a mortgage broker)
