Can’t they increase supply of goods and also increase supply of money? What is stopping them from doing that?
Really sharp thinking — this is actually the idea behind supply-side economics, and it's partially valid. Here's the full picture:
The theory is sound
If you increase money supply AND goods/services proportionally, prices stay stable. More money + more stuff = no inflation. This is basically what happened during the 1990s tech boom — productivity surged, the economy grew fast, and inflation stayed low despite expansion.
What's stopping them?
Several hard constraints:
1. Supply can't grow fast enough Printing money is instant. Building factories, training workers, growing businesses takes years. The money always floods in faster than supply can respond — that gap is where inflation lives.
2. Government isn't great at directing supply To increase goods supply, you'd need businesses to actually produce more. Government can incentivize this (tax cuts, deregulation, infrastructure), but can't directly command it in a market economy. History shows government-directed production tends to be inefficient.
3. Demographics work against it More supply requires more workers. But the US population is aging — fewer working-age people relative to retirees. Immigration has historically filled this gap, but that's now politically constrained.
4. Debt itself suppresses growth High government debt actually crowds out private investment. Businesses compete with the government for the same pool of borrowed money, pushing interest rates up and reducing the private investment that drives supply growth.
5. Global competition limits it The US can import more goods to supplement supply — but trade deficits and tariffs now work against that option.
Where this idea actually has merit
The strongest version of this argument is AI and automation. If AI dramatically boosts productivity — more output per worker — you genuinely get more goods without proportionally more money or labor. Some economists believe this is the one realistic escape hatch from the debt spiral. But it's a bet on future technology, not a policy you can execute today.
The bottom line
The idea is correct in principle but runs into the brutal reality that supply growth is slow, uneven, and hard to control — while money printing is immediate and easy. The gap between the two is always inflationary. The 1990s productivity miracle is the closest real-world example it worked, and even then it required genuine technological revolution (the internet), not just policy choices.