प्रेषक नाना चेंगट ( मंगळ, 07/08/2008 - 19:01) .
"सदर लेखन हा माझ्या 'इंग्लिश डॉक्टरेट'चा एक भाग आहे म्हणून, तसेच या विषयावर मी लिहावे असा काही लोकांचा आग्रह आहे म्हणून माझे लेखन मी येथे जसेच्या तसे प्रसिद्ध करत आहे. हे मराठी संकेतस्थळ आहे याची मला पूर्ण कल्पना आहे परंतु वर म्हटल्याप्रमाणे सदर लेखन हा माझ्या व्यक्तिगत अभ्यासाचाच एक भाग असल्यामुळे तो मराठीत भाषांतरीत न करता इंग्रजीमध्येच येथे प्रसिद्ध करत आहे. जनरल डायर यांनी "अपवादात्मक परिस्थिती" म्हणून हे मान्य केले आहे!"
Money plays a very important and big role in today's westernised lifestyle adopted by nearly all countries including India. Nearly everything is determined by money. Money has become the religion. Act of not earning money is so fearfil that if any one is doing any work for social cause or self happiness, people tend to believe that there must be some profit.
Still it is strange, that only few people know the tricks, by which money originates and disappears again. Money becomes worth less all the time, but this is caused, by the money system itself. Also the chase for economic growth and the always increasing working pressure in industrialized countries, are caused by the money system. Money can also serve for oppression, for instance of the Third World countries, or be the motive for wars, like the one against Iraq or like the proposed Iran war.
Would people like to see behind the scene? Let's go on a money trip.
Exchanges, a primary need : People need each other's products and services. Money is used for exchange of products. Of course, it would be nice if money provided an honest medium of exchange. But this is not the case. Money loses value all the time.
Most people believe, that money is created by the state. However, most governments have little or no say over their country's money supply. Bankers have taken over this power. They have turned this medium of exchange into a lucrative way of taxing the population by collecting interest. Bankers permanently collect interest on nearly all the money in the world.Money is created by banks
Commercial banks create money for loans. They do this simply by typing numbers into the bank accounts of borrowers, who can spend it as if it were actual banknotes. Today the vast majority of all money only exists as numbers in bank accounts. By law, these numbers have the same value as banknotes and coins.Each commercial bank is allowed to create new money this way. Behind the scene, hidden from the customers' eyes, then starts the lucrative way of dealing with other people's money. In fact, the amounts that have been typed into the accounts are comparable to bad cheques. The bank itself does not have the money. When the borrower spends the typed amount by writing a cheque or a payment order, the bank will use other people's money to pay for it. Unseen, this money is taken from the deposits and savings accounts from other customers. The numbers on people's deposit and savings accounts remain unchanged. And by the time people want to dispose of people's money again, there will be some loan that will be paid back to the bank, so people will never know about it. In many countries the minimum reserve banks must keep is fixed by law. This is called CRR ( Capital Reserve Ratio) (Often something like 8-10 percent.) Most of the times these reserves are then kept by the country's central bank like RBI.
Because banks use other people's money to back the new money they lend out, the amount of new money they can create, is limited. In practice around 90 percent of all money on deposit and savings accounts is used to back new money. However, the money on deposit and savings accounts is also money that has been juggled out of the banker's hat once. So, new "money created out of nothing" is backed by already existing "money created out of nothing". But as long as nobody notices, the juggler gets applause. .
The merry-go-round of Money
Loans have a hidden effect. When the borrower spends the money, the receiver will deposit it at his bank. This bank, thanks to this deposit, can issue new loans. These loans too, will be spent and become deposits at a following bank. And so on. Of course, at each new level a bank collects interest. It is a vast merry-go-round of money creation, which inflates the total amount of money in the country. Each time when loans, issued by one bank, arrive as deposits at a following bank, a new round of loans can start. The scheme also applies, when the money of a loan is spent and comes back as a deposit at the same bank again.
So, the effect of the merry-go-round is that banks together create more loans and collect more interest all the time. It inflates the money stock by many times. But do we, or the banks, get richer from this?
Banks create more money, but they don't magically create more goods to buy. When people have more money, but there is still the same quantity of goods to buy, prices simply go up. Each unit of money becomes worth less. That is called inflation.
So, when banks put more money into circulation, the value of each unit of money goes down. And that is also true for the interest they collect. When they issue 10 times more loans and inflate the money stock by 10 times, the interest they collect is worth 10 times less too.
Competition assures inflation
Most countries have only one official currency, but multiple commercial banks issuing the money. And although these banks together do not get much richer from inflating the money-stock, they still do so. The only reason for this is the competition among them. Although competition sounds healthy, when we speak about normal enterprises, competition among banks means lending out as much money as possible and thus maximum inflation.
For each bank competition is just a battle to collect more interest and to increase its market share and benefits. The bank with the best results will grow quicker than the others and, in the long run, will be able to eat competitors.
Not everyone can borrow the money he wants. When lending money, banks demand collateral they can seize if the borrower defaults on his payments. People with sufficient collateral can obtain loans and invest easily. Big corporations even pay less interest. The demand for collateral works as a continual widening of the gap between rich and poor. For societies this is a permanent looming danger. As banks and not governments decide about loans, governments can only try to mask the social cracks, but will not be able to heal nor prevent them.
An effect of loans all borrowers know too well, is that the principle amount has to be paid back with interest. The entrepreneur borrowing money for investments will have to generate extra income to pay this interest. Loans for investments are not only a cash-cow for bankers, but can also contribute to more economic activity. Making loans available for investments would be the useful role of the banks for society.
On the contrary, loans for consumer spending normally do not contribute to more consumption. It is true, that thanks to consumer credit, the purchase of an article takes place earlier. However, this advantage is offset by a longer period of decreased purchase power of the consumer. The consumer must not only earn the money for his purchase, but also for the interest. Therefore he will purchase less consumption goods with his wages. When the consumer pays the interest to the bank, only a part of this money will become wages of bank employees and only part of these wages will be spent on consumer goods. So, credit for consumer goods rather leads to a decrease in total purchases of consumer goods.
Where does the money go?
Once the borrower has spent the money of his loan, it becomes rather unpredictable how successive holders will use this money. One might acquire the borrowed money by selling a car to the borrower. The seller may then pay the money out as wages. The wage earner might then use the money to pay his rent. In fact, as soon as money enters into the big playground of transactions among people, it can serve for all purposes we use money for.
During the lifetime of loans, the money is transferred from bank to bank each time when account holders make payments to account holders of other banks. For this purpose the central bank keeps an account for each bank and executes these transfers.
Sometimes it is more practical to use banknotes and coins. At the bank or at an automated teller machine one can take money from his account. When it is spent, the receiver will bring it to his bank, make a deposit, and will see the amount appear on his account. Money can take the form of cash or numbers in bank accounts. For the payments, it does not matter which form it takes.Where does money end?Money ends when the borrower pays back the principle of the loan to the bank. At that moment the bank transfers money from the borrowers deposit account to the borrowers credit account. The credit account will show, that the borrower's debt has been reduced. The money came into existence by putting numbers on the borrower's account and vanishes by reducing these numbers.
The borrower also has to pay interest to the bank. The interest does not form part of the money the bank created for this borrower. The borrower must work and obtain it from other money in circulation. So, the lifetime of money ends, when loans end. And if all loans would be paid back, there would be no money left. Yet, for the moment, there are oceans of money and on all this money the banks collects interest.
In society money goes round. Money comes people's way when people produce or do things that others want. Money rolls the other way, when people purchase things or make people work for people. Eventually people can save some money for later. Bankers do it differently. They simply and permanently take some money from others and spend it. It is based on the principle, that the money is theirs, since they created it. Thus bankers find it logical, that they are entitled to collect rent. Indeed, in some countries this levy is called "rente". (In English "interest".) And although everyone uses the money, the bank always takes this levy from the first user, the borrower.
Banks cannot be considered as ordinary commercial enterprises. They have declared themselves owners of all money and they make the population pay to rent it.
Nearly all money is temporary. Ending loans have to be replaced by new loans to keep money in circulation. Loans start at different moments and have different lifetimes. Often the borrower pays back a part of his loan each month. It means, that each amount in circulation has its own "time-out" date, which is the foreseen date the borrower has to pay it back.
The total amount of money in circulation determines how much money we dispose of for our transactions and, in the long run, it sets the overall price-level of products and services.
During its lifetime money is a medium for transactions. A transaction takes place when two parties find it interesting. "A" finds the money he gets more interesting and "B" finds the second hand car he purchases more interesting. An exchange takes place. Now "A" has the money and "B" has the car and both feel satisfied.
Transactions may include a payment for added value. When a baker makes bread, he adds his work to the flour, milk and yeast. The work he does represents added value. When he sells the bread the transaction is not just an exchange of property, but includes payment for the added value.
By itself, the total amount of transactions in a country does neither give any indication about the added value, nor about the value of goods and services produced in a country.
हे मिसळ पाव वरुण घेतले आहे.