Story of Indian Rupee

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Member since: Jun 10
Posts: 2153
Location: GTA

Post ID: #PID Posted on: 02-12-11 18:50:08

This news just came in, & all of us should be proud of this news..

India Could Be the New China: Jim O'Neill, Chairman, Goldman Sachs

Member since: Nov 11
Posts: 6

Post ID: #PID Posted on: 04-12-11 16:36:34

Hi ashedfc, Thanks for posting link from my site and triggering this Discussion. Really thanks.

chekram_04, Fido, I am planning to write next article on this topic not sure when may be in Feb 2012.

Let's look at this like this. Let's say there is a Small village with it's isolated economy which is self sufficient. No Import / No Export. Let's say village has money supply of 1 Million XYZ Currency. Now if they keep money supply same and village has same economic activity then prices will actually remain very stable for a while. Sure there will be supply / demand fluctuations but on overall basis it will remain stable.

Now twist comes when say some smart guy discovers telephone. Now that Money is same but "Economic Activity" has increased, to support newly increased activity, The prices actually fall. e.g. in 19th Century ~ till 1910 This thing happened in US. Prices where falling across board over the time they still had lots of new technologies and a very nice society in general.

On other hand in Central Banking system since money supply keep growing it creates massive bubbles in some or other sectors. e.g. way chekram_04 Mentioned, they provide credit to New sectors, which is true. However fact is if that sector really has growth money will anyways flow there. Increased Money supply leads to inflation.. in many cases hyperinflation and so on..

Basically all this boils down to definition of Money and Capital. Central banks when increase money supply they dilute saving of people who save and kind of undermine them.

Again It is interpreted by different people in different way. People who think "very Right" generally follow Sound Money. i.e. say Money of Gold or Money of Silver. etc.. on other hand Socialist thinking people trust more on Paper money as they get easy tool to bailout poor on on going basis without asking savers :)

Contributors: ashedfc(4) commonman(4) chekram_04(3) Fido(3) web2000(1) lol1(1)

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