Why Can’t We Print More Money? Inflation 101 for Hot Girls

Words by Bridget Scott (she/her) 

As anyone who's tried to eat or drive recently knows, being alive is expensive and costs keep rising. Yet given that money can, in the immortal words of Homer Simpson, “be exchanged for goods and services,” Hot Girls across the globe have been asking: Why can’t we just print more of it?

It turns out the answer is inflation.

 Inflation refers to a scenario where things cost more, so the same amount of money buys less. Dr Robert Kirkby, a Senior Lecturer of Macroeconomics at the Victoria University of Wellington, explains that these price increases occur when “there is too much money chasing too few goods.” To illustrate this, consider the humble Scrumpy. A 1.25 litre bottle of the classic cider can usually be procured at Cable Car Countdown for $10 at any given time. But during O-Week, thousands of students with limited alcohol knowledge, a strong desire to drink, and Summer job money burning a hole in their pockets, all head towards Countdown at once. However, Countdown can only store a finite amount of cider in Wellington CBD and inevitably, won’t have enough for everyone, so responds by raising prices to ensure stocks last. 

Normally, these conditions of demand and supply naturally ebb, flow, and come to an equilibrium. This has largely been the case in Aotearoa since the establishment of the Reserve Bank in 1990. Described by Dr Kirkby as “the guardians of making sure there’s not too much money”, the Reserve Bank’s primary responsibility is to limit inflation—ensuring that Scrumpy prices don’t increase by more than twenty cents annually. However, this month Stats NZ announced that inflation has reached its highest rates since the 80’s at a whopping 5.9%—particularly affecting essential costs like rent, fuel, and food.

 Inflation is managed through the interest rate, known as the official cash rate, that commercial banks like ANZ, ASB, or Kiwibank pay when borrowing money printed by the Reserve Bank. When interest rates are low, banks lend more money, charge less interest on debt, and pay out less on savings. The idea is, that when business owners and individuals have easier access, more money flows around the country and the economy keeps moving. For instance, when the manufacturers of Scrumpy can easily borrow money, it’s easier to invest in research or factories or hire more people to increase production—which is probably how Raspberry Scrumpy came to be introduced to the nation in 2012. 

It was this logic which caused the Reserve Bank to slash the official cash rate to its lowest ever rate of 0.25% in March 2020. Doomsday scenarios were on the cards for the economy, with horrific levels of unemployment and recession predicted. Which makes sense! If everyone is legally bound to stay home, Scrumpy can neither be manufactured nor purchased with its usual ease. However, Aotearoa’s economy recovered rapidly after both the 2020 and 2021 Level 4 lockdowns and the economic apocalypse never came to be. Instead, cheap, low-interest lending, and massive government spending through vehicles like the wage subsidy, largely succeeded in ensuring the survival of jobs,businesses, and Hot Girls. 

The problem is, Dr Kirkby notes, that as economies bounced back from the mass disruption of 2020, it was assumed that the increase in inflation that followed in 2021 was a transitory part of that recovery. By the time banks realised its significance, inflation was already out of control. This has been acknowledged by the Reserve Bank who wrote in a statement at the end of February that “inflation is well above [their] target range.”

The Reserve Bank argues that the causes of inflation are dual and “exacerbated by ongoing supply disruptions” in the global supply chain. While true to some extent, Dr Kirkby suggests that the root of the problem lies with excess money in the economy, following two years of money printing. Particularly as the goods impacted by inflation are known as non-tradables—things like Scrumpy, that are manufactured in Aotearoa and then sold within our borders rather than being exported overseas.

This has been acknowledged by the Reserve Bank who note that “further removal of monetary policy stimulus is expected over time given the medium-term outlook for growth […] and the upside risks to inflation.” While the official cash rate was recently increased to its pre-2020 rate of 1%, Aotearoa’s economy is even stronger than prior to the pandemic and further hikes to interest rates are likely to be necessary. Dr Kirkby anticipates that corrections may take two to three years to restore the balance needed for low inflation.

What does this mean for students? As inflation rises, everyday consumers become poorer in real terms. Those employed in salaried positions are likely to be able to negotiate higher rates to their regularly reviewed salaries. In contrast, students tend to rely on fixed incomes, such as the student allowance, or work in industries where incomes are essentially fixed at minimum wage. This leaves students particularly vulnerable as the price of essentials increases out of budget and out of reach. For Hot Girls, that can mean struggling to afford the basics, while Hot Girl treats—alcohol other than Scrumpy, a bag of bagels, or an oat milk flat white—are no longer justifiable. . 

Unfortunately, inflation is “pernicious” and the only option to mitigate risk, according to Dr Kirkby, is awareness. The impacts of inflation aren’t uniform, and affect different sectors at different times. Through paying attention to variations in the price of goods, consumers can take advantage of trends as they emerge, take advantage of bargains when they arise, and avoid being ripped off where possible. The good news is that when money is worth less, the value of interest-free debt, such as student loans, is eroded in parallel. This means that your student debt is worth less, as dollars across the board are worth less.

This might be bad news for the Hot Girl money-printing economists, but while global economic trends wax and wane, a $10 Scrumpy from Cable Car Countdown is forever.