Money, Printing of Currency Notes


Excerpt from the manuscript “What Ails Indian Economy”

“Now the question arises as to from where the country will get money to undertake the works mentioned earlier. (large infrastructural projects of roads, railway lines, electricity generation and transmission, telecommunications, sanitation, housing). To answer this question, it is necessary to understand what money is. We now buy goods and services with currency notes and coins. These currency notes and coins are called money. W can also buy goods and services with Bank cheques and hence these bank cheques are also money. Of late, credit/debit cards are increasingly used to buy things. Hence these cards also qualify to be called money. Already, in many countries coins are not in circulation. After a few years, even currency notes may become rare and in next few years/decades even cheques would become rare and the credit/debit cards would be the main form of money. There may be new instruments in future which one is unable to guess now.

 What is said above means that money is not a product or commodity. It is a concept only. As of now, it is mostly just sheets of paper (currency notes) which are accepted by the people on certain guarantees of the government of the country or issuing bank as a medium of exchange. Thus for a Government, money can never be short s it can print as much currency notes as required.

There will be a lot of arguments against printing of currency notes. Some may talk of stock of gold against which currency notes are to be printed. These people may that gold has value as metal/product. But this is not correct. If people do not attach importance, gold will have no value. For example, if tomorrow the ladies prefer to have ornaments in plastic, instead of in gold, or if thy do not want to wear any jewelry at all, gold loses its value. If the governments do not want to hold it as stock, it loses its value. When the British government was no longer interested to keep large reserve of gold and sold some quantity, the value/price of gold came down.. (to be continued)


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: