I always wondered how money comes into existence in our
economy. Text books says Reserve Bank of India (RBI) prints the money.
Ideally Government should collect the bag full of cash from RBI
and should back it up with Assets they have created. Is it fair to sit and
calculate that the total money printed (excluding coins) by RBI is backed by an
Asset or Loans that Government lends it to others such as Banks who will
further lend to companies / individuals.
However there are other situations also when Money was
printed.
One instance (Source: www.firstpost.com
- December 11, 2013) is listed below:
“The dollar-rupee swap
window that was open for banks between September and November 2013 attracted
$34 billion. Since the idea of the swap is to allow banks to borrow in dollars
and convert the money into rupees at favourable costs, this has resulted in what
could probably be the largest single money printing exercise in India over such
a short period of time.
The net effect of the
$34 billion inflows is an injection of Rs 2,100 billion (Rs 2,10,000 crore)
into the banking system. This injection is primary in nature, i.e money was
printed by the Reserve Bank of India (RBI). The mechanics of the swap
transaction are given at the end of the analysis. When we say printed, it means
the money exists in the books of banks as cash.”
So my understanding about Assets in place for money
printed is thrown out of window.
I got struck badly when I understood that there is
difference in Money and Currency. I believe many educated or degree holders
like CA / MBA / PHD (in commercial subjects) are not aware what the difference is
and how the banking system works.
I bet 99.99 % do not know it. So what is the problem?
Is it that we are not educated about it or partly it is
shared in books or the Modern Banking System has become too complicated for
99.99% of the citizens.
Here I am not going to answer this complex question.
On the
contrary it is better the reader visits the YouTube link (given below) on The Biggest Scam In The History Of Mankind
and understand what is actually happening and how modern banking system is a
delusion which will be blown, when we have to wait and watch. This pertains to
Modern Banking System in The United States of America.
It seems from the You Tube video, it is better to live in a
barter system where the owner of a service / an asset knows what he gets in
exchange.
The other biggest puzzle by the modern day banking system
especially Federal Reserve is the Quantitative Easing. In simple terms, to avoid
deflation Federal Reserve is creating electronic money. Here the effort is to
create inflation in their economy.
However, in turn who gets that money or how it is channeled
there is no knowledge about it. The best part Federal Reserve does not know when to unwind it, what will be the impact and still inflation of 2% is not reached.
I will reproduce the quotes from the You Tube link to
summarize Modern Banking System:
“The modern banking
system manufactures “money” out of nothing; and the process is, perhaps, the
most, astounding piece of “sleight of hand” that was ever invented. In fact, it
was not invented. It merely “grew”. … Banks in fact are able to create (and
cancel) modern “deposit money”, just as much as they were originally able to
create, or call in, their own original forms of private notes. They can, in
fact, inflate and deflate, i.e., mint, and un-mint the modern “ledger-entry”
currency.”
- Major L. L. B. Angas
"Banking was
conceived in iniquity and was born in sin. The bankers own the earth. Take it
away from them, but leave them the power to create money, and with the flick of
the pen they will create enough deposits to buy it back again. However, take
away from them the power to create money and all the great fortunes like mine
will disappear and they ought to disappear, for this would be a happier and
better world to live in. But, if you wish to remain the slaves of bankers and
pay the cost of your own slavery, let them continue to create money."
- Josiah Charles Stamp, 1st Baron Stamp.
Enjoy the You Tube link given below under references.
References:
Difference between Money and Currency:
The Biggest Scam In
The History Of Mankind :
Possible impact of Quantitative Easing - https://www.youtube.com/watch?v=xHU5nj97HNM&list=FL_ywfvIR2JrnMuZt33y7QYQ
Quotes:
Quotes:
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