Tuesday, April 19, 2016

Printed money and commercialization

Commercialization of everything has become the norm rather than the exception of the day. From eternity, people have been manipulating the society and had used their power for their vested interests. It's just that the quantum and volume of everything has become very high. We want to pack everything in those 24 hours and want people to sleep less and less. If people just start sleeping little more, crime rate will go down automatically. 


Let's come back to initial line of thought. Is this commercialization a regular aberration in the society or there is a marked shift in the values and ethos? If I ask you to tell me the famous personalities in human society a century ago. The names we may pop could be Mahatma Gandhi or Martin Luthar King, Einstein or Hitler. But how many of you would name some one who would be knows for his or her economic success. Now ask the current youth about their icons. They are either billionaires or movie actors or sports persons. And underlying that is the commercial success they have achieved. Somewhere in the society, a printed piece of paper has become more important than any physical asset of the world. Probably the world would have been a more sane place if we would have continued with the barter system. We would not be achieving high growth rates but we would have been more satisfied. Printed money is toxic, you can print as much as you want. And than a handful of people control that and benchmark everything in the world against that. A farmer, in scorching sun tills his land and produces food. Someone in the 50th floor of a Manhattan building, in an AC room decides that the whole effort is worth cents in printed money. Yes, we can talk about all demand and supply and macro and micro. But at a human society level, we have reduced those bartering to a printed piece of paper which no one knows how to value. And still we value it with the support of government machineries. The rapid commercialization of the society is this ability to peg anything against paper money and some people can print it as much as they want, and they can influence its pricing also. Imaging I print a 100 on piece of paper and because I am powerful, I give this piece of paper to someone and say that his land is mine. This is what is happening in our society. Rapid commercialization on the base of some printed papers. As much paper we can print, we can induce more commercialization.

Who are suffering in this approach? People who create real assets are the worst sufferer.  Consider a village economy. There is a farmer and a fisherman. Farmer tills the land and produces wheat. Fisherman catches fish. Both are happy as they can exchange goods with each other and serve their individual needs. However there are years, when fisherman does not get enough fish or the farmers doesn't get enough produce. Till they are in good terms, they can cover each other for bad years. However it's quite possible that the friction may start happening, especially in bad years. Both might feel cheated with each other. This is basic nature of human. Now comes another guy, who says that he will reduce the friction as he can print some piece of paper and they can exchange their goods based on piece of paper. If one is in good years, he will get more piece of paper from the other one which he can utilize in his bad years.  Underlying something has happened. The money lender without doing anything has started getting a share of wheat and fish. Also if he has to buy more fish or wheat, he can just print paper and give it to the farmer and fisherman. Both, farmer and fisherman now consider the printed paper to be of more value than the actual wheat or fish.

Now comes a bad year, when both fisherman and farmer could not produce enough and they have to buy from others in the nearby village. The money lender has already put his printed paper system in the other village. So he loans the printed paper to both. As both are desperate, they  sign on selling their complete produce to the lender in next season. Also they could see the power of printed paper, as they can use it to buy the produce from the other village. 

Now comes the next year and both farmer and fisherman has produced enough. However as per their promise they sell everything to the lender. It's convenient  also. Farmer thinks who will haggle with fisherman and vice versa. The lender is smart as he induces a small inflation and gives them more printed paper. After all, he just have to print them. But at the same time, he ensures that his buys and sells margins get widened. That way he is able to buy more and more every year. The material asset is produced by someone but the ownership in real sense resides with the lender. And than couple of bad years, the lender buys the land and lake. Fisherman and farmer now work as labours for him. That's the power of printed paper.

This is somewhat very similar to the concept of god. Because we vest our power to the concept, the concept becomes more powerful than the human.

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