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The new monetary issue and its relationship to the economy

   The new monetary issue has a high importance in the world of economics and has advantages and disadvantages that can be touched after the issuance and it has an effect on purchasing power and has an effect in raising and lowering prices all over the world.

The new cash issue

The new monetary issuance is considered: creating an additional amount of money that devolves to the state to be used to finance its public expenditures that exceed

What I got from other sources of revenue.

Among the direct images in the state’s issuance of the new cash: If the state is the one that undertakes the process of issuing itself, if it is


Issuing bank is not available

As for the indirect forms: if the issue is in the form of a loan (treasury bills) from independent public bodies based on


Deposit money or clerical cash is money created by commercial banks.

The expansion of bank credit is called the method of creating an additional amount of money by the state by borrowing from banks


The term (financing by inflation) refers to: the new monetary issue, the expansion of bank credit.

According to the traditional financial theory, resorting to the new issuance harms the economic balance.

According to the modern financial theory: the state can resort to the new monetary issuance in the event of disrupted economic resources.

One of the negative economic and social consequences of resorting to finance with inflation, which is the result of which the traditionalists reject it

Resorting to this method:

In quality

Inflation increases the inequality between different income, reduces the size of saving, and affects negatively

Investments, which increases the size of the deficit in the balance of payments.

The modern theory has proven the incorrect assumptions of the traditional theory regarding the new monetary issue, as the economists found

The Hadiths:

 The view of the traditional theory on its own is the full employment balance and the permanent equality between saving and investment is not

, The state can resort to the new monetary issuance in order to finance part of its public expenditures without realizing the effects


Negative for inflation.

In the following cases, it is possible to resort to financing by inflation in underdeveloped countries: When purchasing the main export crop in the country

The backward person and then the government sells it in order to buy at its price the development equipment and devices that are not available inside the country, and when purchasing factors

The production necessary for development and available within the country, and in order to finance consumer projects that consume quickly.

In the event that salaries and wages rise in parallel with the increase in consumer goods prices, then inflation becomes: of a cumulative nature.

The experience of most of the underdeveloped countries that resorted to financing with inflation proved that the procedures of this method are difficult to implement.

Among the most important measures taken to ensure the success of the inflation financing method in 

underdeveloped countries:

This method is not resorted to unless there are idle resources in the economy, and investments are directed to projects that lead to

Increasing the production capacity of the national economy, directing investments to projects that increase consumer goods

Quickly and directly, to impose controls on salaries and wages, for the state to provide necessary consumer goods in order to reduce

The unity of inflationary pressures, that the inflationary financing of investment in small doses and for short and intermittent periods, increases the burden

Tax, with the aim of absorbing part of the increase in cash incomes that are invested in productive investments.