Sunday, July 25, 2021

Currency, Money, And Inflation

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By Anang Pal Malik

Currency notes are not money. Otherwise govt could print truck loads of them and make all of us rich. Money is just a receipt given us in token of our work, so that we can purchase somebody else’s that work which is surplus to him. So, basically, the work we do is the money. If nobody is working there can’t be any money, even if govt printing presses work 24×7.

Currency notes are just a convenient form of receipt which has the advantage of being recognised readily by all. If govt prints more currency notes, with work in the economy being constant, that just reduces value of each currency note in the hand of people, because more currency notes are chasing the same work to purchase. This is called inflation in common parlance. Inflation is when govt prints more money without matching work in the economy, chiefly to fund its freebie programmes. In the process, hurting the poor the most, whom it claims to help. Inflation is the biggest tax, hurting the poor the most.

Inflation also disrupts signal system of the market, and therefore wrong allocation of resources results, causing many things becoming too costly, and therefore not purchased, and many things too cheap, and hence not produced, and many things produced in excess to requirement. Causing unemployment for both these reasons. So more freebies are required, more currency is printed. The whole economy is scrambled. Zimbabwe happens. We barely escaped this fate in 1974-75, 1988-89, and recently in 2012-13.

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