Does India print it's own money?

[Dhondy]

ask this question because I think the U.S. dollar is gonna tank sometime soon (couple of years maybe ... maybe 10 years); and the main reason for this is the U.S. government's policy of borrowing money from their private bank: the Federal Reserve. This is exactly why inflation cannot be stopped in the U.S. and why (despite a robust economy), the U.S. national debt keeps getting bigger and bigger. I'm not talking about a budget deficit, but the NATIONAL DEBT. The US government policy is forced upon them by the fact that Americans continue to live beyond their means. Private saving is at historically low levels, and therefore the government has no option but to borrow to finance its spending. How is this different from the budget deficit? BTW, this is just one of the reasons why inflation cannot be stopped. The other is of course, the unbridled consumerism of Americans, coupled with high oil prices, which constantly sucks in imports into the US. That trade deficit is going to get wider, not smaller. It's pretty much the same here in the UK. The US dollar is in fact staying afloat due to the huge appetite of the Japanese and Chinese governments for it. They simply can't have enough of the greenback despite its falling value.

[Zooter]

ask this question because I think the U.S. dollar is gonna tank sometime soon (couple of years maybe ... maybe 10 years); and the main reason for this is the U.S. government's policy of borrowing money from their private bank: the Federal Reserve. This is exactly why inflation cannot be stopped in the U.S. and why (despite a robust economy), the U.S. national debt keeps getting bigger and bigger. I'm not talking about a budget deficit, but the NATIONAL DEBT. The US government policy is forced upon them by the fact that Americans continue to live beyond their means. Private saving is at historically low levels, and therefore the government has no option but to borrow to finance its spending. How is this different from the budget deficit? BTW, this is just one of the reasons why inflation cannot be stopped. The other is of course, the unbridled consumerism of Americans, coupled with high oil prices, which constantly sucks in imports into the US. That trade deficit is going to get wider, not smaller. It's pretty much the same here in the UK. The US dollar is in fact staying afloat due to the huge appetite of the Japanese and Chinese governments for it. They simply can't have enough of the greenback despite its falling value.

Okay, a couple of things Dhondy ... your disdain for the American public is a bit misplaced. Yes, Americans are borrowing more for financing their education at University, or purchasing a home or starting or expanding their business, but the reason for the borrowing is because interest rates have been kept artificially low and money made plentiful. The borrowing beyond sound reason would not take place in the first place if the Fed did not allow for cheap money to enter circulation. (This is why people are calling for a return to the gold standard, because that might restrict excessive lending). Here's how the Fed money making system works: First, the U.S. government needs money to conduct it's business. It can do so by implementing taxes and/or borrowing money from a bank. Congress doesn't want to tax the electorate too much as it will prevent them from getting re-elected. So what do they do? Why take out a loan from the Fed, of course. How? Simple: issue bonds and various other govn't financial instruments such as T-bills, notes, securities etc. and sell them. The principle buyer of these bonds is the Fed. However, it has NO MONEY to buy them with--it just invents electronic credits and "supplies" the gov't with the principle at HUGE interest. The gov't never has enough receipts to cover it's outlays so in that fiscal year, it runs a deficit. If in the following year, it remain's on-budget, it STILL has debt to repay from the previous fiscal year. (This is exactly why when Clinton balanced the budget--in fact got a surplus--the American national debt remained in the trillions). Between 1776 and 1917, the American gov't either NEVER ran a debt, or if it did during times of war, was able to pay it off. Since 1918, the United States gov't has never been out of debt, and in fact, it's been increasing every year. Once the Fed creates that money out of nothing, it usually reduces the discount rates for it's privately owned member banks. What do people or institutions do when money is easy to borrow (?) ... borrow it of course to conduct their business. And in fact, at the fractional reserve rate, banks can lend out MORE MONEY than they have assest on deposit. The current rate is at 1:9. That's why, with each sucessive loan from bank to bank (starting with the Fed), new money is created--money backed by nothing. And that's what money is: MONEY IS DEBT. And this is precisely why inflation seemingly cannot be stopped. The inflation is nothing but an excessive amount of money in the economy beyond the requirement of that economy. The people aren't to be blamed, the Fed is for starting the process in the first place. As a consequence of that inflated money supply, prices go up and the purchasing power of the dollar, goes down. And the lower middle class and poor suffer the most because the wealth (in an invisible way) is transferred from them to the rich, because they NEVER have access to that increased flow of money BEFORE THE MARKET HAS REALIZED of the greater quantity of money--i.e. when prices remain the same. Belive me, the bankers are planning this. The debt is not going to be paid off and the dollar will continue its devaluation. I think a major recession is not too far off. GO RON PAUL!!!!!!!!!!!!! :wink_smile:

[Zooter]

... ... and to tie it all back ... India will be subject to these boom and bust cycles if it's Central Bank is in the hands of private individuals. The bankers make their money when stock markets crash (they're the ones that crash them in the first place).

[Zooter]

Quick note Dhondy: I think you have public and private debt mixed up. I have always been referring to American PUBLIC debt--the debt owed by the U.S. government to it's creditors. The largest one being the privately owned Fed. Reserve Corporation. The private debt includes debt owed by individuals or corporations--but that scenario ain't that rosy either. In fact, ... this is another reason for you not to blame the average American consumer. Just imagine that you, Ravi and myself go to our respective banks to take out loans to help start our own business. The banks that we go to WILL NOT HAVE the money we ask for as a demand deposit. They will simply create the loan money we are applying for out of thin air and put it into their computer system. (They are allowed to do so within the fractional reserve system). They expect however, that all 3 of us will pay back the principle plus the interest accrued otherwise our collateral will be their's to keep. So, let's say we 3 enter our economy and start up our businesses. We must trade with each other and do business in order to make enough money to match our principle, plus our interest, plus a profit (so we can eat and have a home). However, the banks only created the principle in our nation's total money supply--they NEVER created the interest. (And recall: more than 95% of the money supply is created this way--electronic credit). So, where the hell does that extra money come from? The answer: it doesn't. One of us 3 will have to foreclose and the bank will take that person's assets. Our debt IS the money--it's not gold, is nothing. The debt is the money. As simplistic and evil as this sounds--it is real. This is how a modern economy functions. People are held in perpetual debt--both mom and dad now work longer hours and with fewer vacations, and still--the average American family is in debt. So, I blame the system--the Fed and it's private banking network--this is the true culprit. Anywhoop--here's to Ron Paul killing the bank!!!!!!!!!!

[Dhondy]

Nope, not mixed up at all. Where do you think the government gets its spending money? From taxation. What else? The government draws on the savings that people all over the nation put in government backed instruments such as treasury bonds, or national savings in the UK. When people stop saving, government inflows suffer as a result.

[CC1981]

Wow very informative and educational thread on a topic i know nothing about (ie, money). Thanks all !

[Zooter]

Nope, not mixed up at all. Where do you think the government gets its spending money? From taxation. What else? The government draws on the savings that people all over the nation put in government backed instruments such as treasury bonds, or national savings in the UK. When people stop saving, government inflows suffer as a result.

The government has more than one source of income. Taxes are one (in the U.S., income taxes are the largest source bringing in 1.1 trillion last fiscal year). The other: loans from the government's private bank. In your country, from the Bank of England; in mine: from the Federal Reserve. And yes, it's true, if people don't have savings, they can't buy fixed interest securities like T-bills or T-bonds or T-notes or any other gov't security to help their government by holding it's debt. But compared to the Fed, I don't believe the people stand a chance. The Fed literally can buy whatever it wants--it does not need to prove it has reserve funds to buy gov't securities. On a WEEKLY basis more or less, they just give the gov't whatever money it asks for by the billions of dollars. Just as you have an account at your bank, the U.S. gov't is a customer having it's own account at it's bank. And this is the crime. The Fed Open Market Committee snatches up gov't securities from whoever is selling them by simply creating electronic credit--the people don't stand a chance. In any case, individual savings will never reach the levels they used to be at because it simply is not mathematically possible. The money is the debt. And for the economy to not collapse, EVERYONE can't get out of debt and build up savings--on an individual level it might be nice--but on the whole it's impossible. For money to circulate and for the economy to remain extant, individuals and small businesses HAVE TO BE IN DEBT. No debt = No money. Once again, ... let's assume I am a person with a job playing my little part in my country's economy. Assume I earn an annual salary of $60,000 USD. What does that mean? That I have a pile of gold worth 60,000 USD. No! That money came from the general economy -- the economy of my country is worth at least $60,000 USD so that at least I could get paid. And how is my nation's economy valued at 100,000 USD or whatever it's at? By having 100,000 in reserve gold or silver? Nope! The overwhelming method is through loans. It is a well known fact amongst top economists that the United States operates under a debt-money system. Take away the debt, and the U.S. economy literally collapses. This money as debt system has been created by the Fed, and it is unsustainable. The financial crime is not of the individual failing to save (although this is not financially sound on an individual scale); the crime is committed by the banking cartel.

[Zooter]

It is time consuming, but I HIGHLY SUGGEST downloading the following torrents: The Money Masters and Money As Debt and go to Google Video and just do a search for "Federal Reserve." That's all the lesson you'll need on finance. I'm just repeating everything I've learned from those sources--I'm no top economist publishing my research or anything. In my opinion, ... if you've never seen The Money Masters, ... you're just as uninformed as the chap who still thinks that a terrorist flew a 757 into the Pentagon creating a 16-feet diameter hole WITHOUT any damage from the wings and engines on either side of that hole. ... oh and the fuselage of a 757 is itself wider than 16 feet! If it wasn't so tragic, I'd :hysterical:

[THX_1138]

This is the part i don't get. Say i steal 1 million bucks and stash it away someplace. Now, even if the serial number of all this is very well documented and all, how are they gonna catch me when i use this money ? Obviously i won't be dumb enough to go use this money for any banking/govt. related stuff but say i go to a store and buy 100 bucks worth of cigarettes every week or when i go to vacation in Greece, i use this stolen money for all my restaurant/taxi bills. Obviously these arnt fake-money to arouse suspicion- so when i hand over this money, nobody is gonna challenge it for being fake. By the time it makes it to some bank and someone notices that this money is the 'missing money' based on serial number, how are they gonna track it back to me ? A shopkeeper won't remember who gave him that 100 bucks note 4-5 days ago or some Greek restaurant in Greece isnt gonna remember which foreigner paid for the car and booze with this stolen money.

if you stash the money you dont get to use it... so there you go genius, whats the point of stealing it? and if you do end up using it much later, when the money is deposited into the bank, the banks are all equipped with serial numbers of forged or stolen bills and automatically a flag goes up. in a matter of days, one can trace the movement of the bills and thus come closer to catching the culprit if they have not already. dont debate with me on this CC, i know you have a nack for engaging in nonsense debates, but really i m not interested this time.

[Zooter]

Forgot to mention one thing Dhondy, ... in defense of my fellow Yanks ... it don't matter how much John Q. Public tries to save as his money is worth less and less with every passing year. Savings themselves are reduced in value due to the Fed created inflation. The only ... ... I repeat ... THE ONLY members of society to benefit from expanding credit are the people most closely associated with the governemnt who know WHEN interest rates will be lowered ... these are the banks themselves, defense contractors and international corporations. The middle and lower economic classes get this news too late and thus are victims of the already risen prices of goods and services (which rose when the market realized that money was in too high a supply relative to the actual production of goods and of services). In fact, Ron Paul calls this the "invisible inflation tax" as the un-connected members of society "pay the most" (i.e. bear the biggest brunt of inflation). So when some Central Banker Chairmen says that the economic picture is rosy due to only 2% inflation, ... he is being imprecise because the middle and lower classes actually suffer around 7 or 8% inflation. Private banking cartels (i.e. Central Banks): EVIL The People: VICTIMS

[Zooter]

I can't seem to find out for certain if the RBI is privately owned. However, I went to the BIS website (the Bank of International Settlements) in Basel, Switzerland and it turns out that the RBI is one of it's member banks. Despite nationalization of the Bank of England and the Bank of France, through policy, they still work as if they were private hands. I now doubt whether the Reserve Bank of India is controlled by the Indian gov't for India's benefit. Now I'm seriously starting to think that WE ARE STILL SLAVES--WE JUST DON'T KNOW IT. Not just us--most countries--especially the United States and Japan. Simply amazing. No one knows how money works.

[gator]

wow...... amazing info, Zoots.... very gripping read.... i will definitely take a look at those videos.... but the thot is jus scary...

[Holysmoke]

brilliant brilliant thread. Zoots, you seem really interested in this topic... Is this your field? Somehow I end up assuming everyone here to be EE or CS major.. (except Dhondy ofcourse)

[Zooter]

brilliant brilliant thread. Zoots, you seem really interested in this topic... Is this your field? Somehow I end up assuming everyone here to be EE or CS major.. (except Dhondy ofcourse)

Nah, ... just a side interest of mine (ever since 9/11). Once you start down the path, you can't stop. :wink_smile:

[gator]

here is an interesting article on how the indian government is screwing up while calculating inflation.... prolly the only developed/developing country which uses WPI instead of CPI... ______________________________________________________ Rising inflation was the most recent ticklish political issue that hit the Manmohan Singh government. But was inflation rising because of price rise in essential commodities? Or was it because of the 'erroneous method' of calculating inflation? Some economists assert that India's method of calculating inflation is wrong as there are serious flaws in the methodologies used by the government. Economists V Shunmugam and D G Prasad working with India's largest commodity bourse -- the Multi Commodity Exchange -- have come out with a research paper arguing that the government urgently needs to shift the method of calculating inflation. Saying that there are serious flaws in the present method of calculating inflation, the paper India should adopt methodologies in developed economies. So how does India calculate inflation? And how is it calculated in developed countries?

• India uses the Wholesale Price Index (WPI) to calculate and then decide the inflation rate in the economy.
• Most developed countries use the Consumer Price Index (CPI) to calculate inflation.

Wholesale Price Index (WPI) WPI was first published in 1902, and was one of the more economic indicators available to policy makers until it was replaced by most developed countries by the Consumer Price Index in the 1970s. WPI is the index that is used to measure the change in the average price level of goods traded in wholesale market. In India, a total of 435 commodities data on price level is tracked through WPI which is an indicator of movement in prices of commodities in all trade and transactions. It is also the price index which is available on a weekly basis with the shortest possible time lag only two weeks. The Indian government has taken WPI as an indicator of the rate of inflation in the economy. Consumer Price Index (CPI) CPI is a statistical time-series measure of a weighted average of prices of a specified set of goods and services purchased by consumers. It is a price index that tracks the prices of a specified basket of consumer goods and services, providing a measure of inflation. \CPI is a fixed quantity price index and considered by some a cost of living index. Under CPI, an index is scaled so that it is equal to 100 at a chosen point in time, so that all other values of the index are a percentage relative to this one. Economists Shunmugam and Prasad say it is high time that India abandoned WPI and adopted CPI to calculate inflation. India is the only major country that uses a wholesale index to measure inflation. Most countries use the CPI as a measure of inflation, as this actually measures the increase in price that a consumer will ultimately have to pay for. "CPI is the official barometer of inflation in many countries such as the United States, the United Kingdom, Japan, France, Canada, Singapore and China. The governments there review the commodity basket of CPI every 4-5 years to factor in changes in consumption pattern," says their research paper. It pointed out that WPI does not properly measure the exact price rise an end-consumer will experience because, as the same suggests, it is at the wholesale level. The paper says the main problem with WPI calculation is that more than 100 out of the 435 commodities included in the Index have ceased to be important from the consumption point of view. Take, for example, a commodity like coarse grains that go into making of livestock feed. This commodity is insignificant, but continues to be considered while measuring inflation. India constituted the last WPI series of commodities in 1993-94; but has not updated it till now that economists argue the Index has lost relevance and can not be the barometer to calculate inflation. Shunmugam says WPI is supposed to measure impact of prices on business. "But we use it to measure the impact on consumers. Many commodities not consumed by consumers get calculated in the index. And it does not factor in services which have assumed so much importance in the economy," he pointed out. But why is India not switching over to the CPI method of calculating inflation? Finance ministry officials point out that there are many intricate problems from shifting from WPI to CPI model. First of all, they say, in India, there are four different types of CPI indices, and that makes switching over to the Index from WPI fairly 'risky and unwieldy.' The four CPI series are: CPI Industrial Workers; CPI Urban Non-Manual Employees; CPI Agricultural labourers; and CPI Rural labour. Secondly, officials say the CPI cannot be used in India because there is too much of a lag in reporting CPI numbers. In fact, as of May 21, the latest CPI number reported is for March 2006. The WPI is published on a weekly basis and the CPI, on a monthly basis. And in India, inflation is calculated on a weekly basis. http://www.rediff.com/money/2007/jun/07infla.htm

[Dhondy]

Yup, using the WPI is madness. It contains items that are no longer used. Besides, the WPI is not relevant for the average consumer. The whole of Europe uses the CPI, also called the HCPI, or the harmonized CPI, to aid direct comparison of inflation rates between countries. However, the UK also uses another index of inflation, called the Retail Price Index (RPI) for the purpose of deciding annual rate of uplift of pensions and benefits. This contains many housing related items not included in the CPI, such as mortgage rates, council tax, conveyancers' and solicitors' fees, etc. On average the RPI is around 1% higher than the CPI. Until a few years ago, the UK used a measure called the RPI-X, obtained from RPI by excluding mortgages, for indexing its inflation. It switched to the CPI to be in sync with the rest of Europe. I agree that this is a great thread. Pity is, that there are many people here, with an excellent knowledge of finance, who have decided to abstain, while Zoot and I, both medics, have carried on regardless. The same apathy can be seen in the Math, Science and other science related threads.

[gator]

Zoots has really triggered an interest inside me.... since i read this thread, i have been googling and reading all kinds of related stuff....

[ludhianvi]

really interesting post. I was bored and now I am anticipating to watch those two movies : Money Masters and Money as Debt. thanks :P

[Zooter]

Another piece of corroborative evidence that international institutions like the World Bank, Bank of International Settlements, and even the UN are just tools for the international banking network to make money is evidenced by the fact that China and many Arab states are switching to ... ... ... ... (drumroll please) ... ... ... GOLD BACKING!!!! They're on to the con-game. Arabs and the Chinese have realized the money-making banking scheme the high caste Europeans (Lord this and Baroness that) are up to and they don't want financial and economic integration into that type of system. So, they're setting themselves on the path of "currency independece." The South Asians?? HAHAHAHAHAHAHAHAHAAA Dafod lok.