PRINT OR BORROW MONEY ?

A) ECONOMIC NEED
Within a nation there is a demand for various essential needs (food, clothing & shelter) and other luxury needs (cosmetics, entertainment, luxury, vehicle etc…) among the people (say 100 Million). Also there is a bulk demand for building buildings, bridges, communication links, roads,  transportation etc  . among the government and private corporate sectors (say 1,000 millions).
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1) PRINTING SERVICE.
Say the  Central bank, the top authority for printing  notes, with the approval of the apex government, prints  and distributes to the needs through government channels and banks. The condition will be to return this, within a reasonable period with a nominal interest per annum. This is a domestic money supply service. Then what will happen ?   
DEMAND & SUPPLY – RANDOM
a) The people who got 100 M without working and earning for it, will fulfill their basic needs beyond their requirement and  waste  the money. In turn they create demands for many items not within the supply range of all the productive sectors put  together ,within the nation.
b) The government and private corporate sectors got 1000 M, without any pre condition to utilise the money productively, and provide a reasonable or more return on their investments.  The government sector will enjoy this internal money supply, implement the projects at ease , over spend divert the money to non-priority sectors, and delay.  
This will offset all the production plans of  various commodities by the government and private sectors.  The demand and supply position and plans of the government and private sectors will go hay while. The prices of any commodity, one can think of, will start going from the current level towards the sky, continuously and without any end point. This is called INFLATION, a situation where the people cannot live in peace, harmony and prosper.
EXCHANGE RATE - DOWN
Since the note printing service has disturbed the demand and supply situation in the country, the   people, private and government sectors will resort to imports  under the support that the commodities are shrt in the country. More the import than export situation will bring down the exchange rate of the domestic currency in the international market will come down.
RATE OF RETURN – DOWN
The people will not be in a position to return the money back to the apex government. Use their citizenship and voting rights to write off the amount received by them. (This is similar to the freely acquired rights of the elected members in many countries, destroy the nation and its wealth, without knowing how hard it was to get the independence).
Both the government and private sectors  will also be not be in a position to return the money back to the apex government. Use their power and legal rights to write off the amount received by them.
This will  result in lowering the economic status of the nation.
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2) LOANING SERVICE.
Say the apex government decides to meet the  domestic needs of the people 100 M) and the  operating governments (1,000 M) through a loan, what will happen ? The apex government  in any nation do have a privy-purse with enough money give domestic loans.

a) BANKS : The domestic banks provide this loaning service.  But with stringent  conditions for the return, with a sizeable interest per annum, reliable surety and a marketable security, equal to or more than the loan given.

This 100 M for the people, 1,000 M for the operating government is not a free money.  There is a “whip”  behind,  to utilise the money for the purpose, productive utility and pay back the amount and the interest.  This is good for the nation.
DEMAND AND SUPPLY - CONTROLLED
Since the needs and projects are studied, analysed and justified by the loaning bank in advance, this will work with a demand for commodities within the supply position of the productive sectors within the nation, and do not invoke the inflation or jeopardize the demand supply situation within the country.
EXCHANGE RATE – STABLE
The import contents for the people or the private / government were prefixed in the support project paper of  the people or the private / government sectors  seeking the loan. This is evaluated by the loaning bank and fixed. Or the bank may directly pay to the foreign suppliers and arrange for the import of approved commodities. Hence there could not be any unreasonable and unjustified impact on the exchange rate of  the domestic currency in the international money market.
RATE OF RETURN – UN PREDICTABLE
BUT, if the people and the operating government fail to complete the purpose of the loan, people and the government/private sectors, with their citizenship, voting rights, their social power and legal rights, pressuriSe the BANKS to write off the amount received by them.  BECAUSE it is a within the nation affair.
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b) EXTERNAL : In most of the nations in the world, the banks do not have excess money to provide the loan service . It could be due to their administrative defaults, investment of their funds in projects of no return, or the domestic pressure to write off  the domestic borrowings.
Hence the apex governments resort to get loans from international sources like IMF, UN, World Bank etc.. who carry large sums, with an open gate the borrowers.
These international sources provide this loaning service.  with reasonable  conditions for their  return, with a nominal interest per annum,   and a reliable surety from the apex government.
DEMAND AND SUPPLY - CONTROLLED
Since the needs and projects are studied, analysed and justified by the loaning authority in advance, this will work with a demand for commodities within the supply position of the productive sectors within the nation, and do not invoke the inflation or jeopardize the demand supply situation within the country.
EXCHANGE RATE – STABLE
The import contents for the people or the private / government were prefixed in the support project paper of  the people or the private / government sectors  seeking the loan. This is evaluated by the apex government as well as the loaning source and fixed. Or the loaning source  may directly pay to the foreign suppliers and arrange for the import of approved commodities. Hence there could not be any unreasonable and unjustified impact on the exchange rate of  the domestic currency in the international money market. The international loan does not go into the calculation of the import and hence do not disturb the  exchange rate parity of the domestic currency  
RATE OF RETURN – UN PREDICTABLE
BUT,  the people and the operating government may fail to complete the purpose of the loan. Then the people or the private or the  loan utilizing government will jointly become a debtor to the  international  loan source.
This will tie a “payable tag’ on every body (This happens to every under developed and developing nations)
This will  result in lowering the economic status of the nation
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B) INFERENCES
To meet the internal domestic and government/private demand,
1) Printing currency  leads to inflation through increase in money circulation. This will lower the domestic economic situation through jeopardizing the domestic demand and supply, lowering the exchange rate of  domestic currency, and promotes a non-return on the investment. It is because of no preset controls and conditions on the end use. (BAD).
2) Domestic bank loans - There is no disturbance to domestic money circulation, better control, and not significant disturbance to the domestic demand / supply and exchange rate.  But could lead to an  unpredictable domestic economic situation. It is an internal money distribution with controls but subject to pressure to right off  by the receivers, when the domestic utility and projects fail. (BETTER)
3) International loans – There is no disturbance to domestic funds, better control, and no disturbance to the domestic economy, exchange rate  and currency circulation. It is an external money distribution with controls but could lead the government and people to be a hidden-debtor to the funding source. (ACCEPTABLE WITH HIDDEN BURDON)
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D) WHAT IS THE REMEDY ?
a) I have Geometrically established the following guidelines for accelerated development, related to the area of investment and implementation.
1.  Domestic investments should be through domestic savings (individual / corporate / government, even though foreign to start with). [Exogenous circle. It implies that the government should provide enough incentive to motivate the savings at individual and corporate level]
2.  Domestic human potential should man the domestic technology (latest technology moderated to suit local environments) [Endogenous circle].
3. Synchronise Exogenous and Endogenous circles & optimise their dimensions.
4.  This is universally applicable to all developed, developing, and under-developed nations.
See in my book “SED BY DRVSRS” at  http://drvsrs.com/store/page1.html#9   
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2) I have also Algebraically established the following guidelines for accelerated development, related to the area of productivity measurement and Management decisions. (SED = Socio-economic Development units)
1. Productivity = Sed goals/input > 1  & SED goals/output  > 1
subject to output/input > 1
2. Social rate of return is important than Quantum rate of  return.
3. Intangible elements  are important than  tangible elements. (Psycho-Socio-Inter national-Universal)  
4. Management decisions are optimum when  
SED goals/Input decisions   > 1  &  
SED goals/output  decisions > 1, subject to  
Output decisions/Input decisions > 1
5. This is universally applicable to all developed, developing, and under-developed nations.
See in my book “SED BY DRVSRS” at
http://drvsrs.com/store/page1.html#9    
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