Currency printing, the volume and denomination of the notes printed is overlooked by the government of any country. The quantity of currency to be printed depends upon the requirement of the central bank of that country. Uncontrolled printing of currency notes can lead to excessive money in the domestic market which leads to rapid rise in demand for products, goods and services, This will in turn lead to scarcity of goods in the market due to scarcity of supply and hence increase in their prices, forcing the consumers to buy the same good at a much higher price. The economical term for this situation is called Hyperinflation. As defined in economics The main cause of hyperinflation is a massive and rapid increase in the amount of money that is not supported by a corresponding growth in the output of goods and services. This results in an imbalance between the supply and demand for the money (including currency and bank deposits), accompanied by a complete loss of confidence in the money.
In recent past the world has seen a huge inflation in Zimbabwe which ultimately led to the collapse of their national currency- The Zimbabwean Dollar. The inflation in the country was so high that to buy an egg in Zimbabwe you need to have 50 billion ZWL. The exchange rate was pegged at 7 million ZWL to one US dollar. After a considerable effort by the financial system of the country to manage the crisis failed they were forced to adopt foreign currency for domestic trades. Zimbabwe now uses US dollar, Euro and South African Rand for transactions. This hyperinflation has been caused primarily by a serious mistake done by the Reserve Bank of Zimbabwe's choice to mushroom the money supply.
Similar incidents occurred in the past as well. In 1920s Germany experienced such a high inflation rate that the value less bank notes were found scattered around in streets and were literally used as wall papers. Similar incidents happened during world war 2 in Greece when its currency drachma experienced such high inflation that the prices of goods in the country doubled in every 24 hours.
Bretton Woods System was established which made it obligatory for each member country to adopt a monetary policy that maintained the exchange rate of its currency within a fixed value—plus or minus one percent—in terms of gold. Bancor was proposed as a world currency unit, however U.S. dollar took over the role that gold had played under the gold standard system. The Bretton woods system was dissolved in 1971. IMF(International Monetary Fund) now oversees global financial system and stabilizes exchange rates and assist the reconstruction of the world's international payment system.
