Economic Decline finally hits India too. Govt. in denial?

[Sei]

Woah dint know they did reduce the paper size.
As I said I am also into IT so my theories could wrong.
That said, whats your opinion on these things?

I think he was being sarcastic

Ohhhh Myyyy God!

1947---> 1 Re = 1 GBP

http://www.tjaindia.com/articles/currency-13-01-2012.pdf

 

[sharktale1212]

I think he was being sarcastic

Ohhhh Myyyy God!

1947---> 1 Re = 1 GBP

http://www.tjaindia.com/articles/currency-13-01-2012.pdf

Ah ok, my bad then. #NinByChoice to answer your question: Reducing paper size is not something undertaken so easily. Normally, countries tend to print more (ala US Quantitive Easing). If things get hairy print only on one side (ala Germany after the first world war).

Sei, the comparison between 1947 and todays rate is a bit of apples and oranges comparison. At that time, we were following something called Bretton Woods. As per the agreement, all the currencies were fixed to dollar which in turn was backed by gold (as in fixed amount of paper currency printed for a fixed amount of gold). Basically that will mean all currencies were backed by gold they had. So my guess is either with India being part of British empire or the amount of gold stored our rates were more on par with GBP.
Currently, we are more of fudiciary currency system meaning the currency (notes) are not backed by anything phsycial rather a promise by the government (I promise to pay the bearer ) So the rates are also affected how people think of the government.

 

[NinByChoice]

^^ Wasnt sarcastic earlier. A Re1 coin isnt actually going to cost Re1 to produce. A Re1 coing doesnt have Re1 worth of gold/silver/metal. Just like a Rs1000 note doesnt cost Rs1000 to produce. It doesnt have Rs1000 worth of paper in it either.

Most of our currency is not in coins or notes. It exists in electronic form, for instance in bank accounts.

 

[sharktale1212]

^^ Wasnt sarcastic earlier. A Re1 coin isnt actually going to cost Re1 to produce. A Re1 coing doesnt have Re1 worth of gold/silver/metal. Just like a Rs1000 note doesnt cost Rs1000 to produce. It doesnt have Rs1000 worth of paper in it either.

Most of our currency is not in coins or notes. It exists in electronic form, for instance in bank accounts.

Bro, isnt that common sense? Gosh, I hope others did get my point I was trying to make.
I believe the term is called Seigniorage. The amount paid to mint the coin.

Please check out debasement and devaluation, on wiki or any other reliable sources so that you get a good idea. Even inflation erodes your value, electronic form or not.

 

[NinByChoice]

Care to explain this statement.

One point I forgot to make during the reducing metal content in coins. Reducing metal content not only devalues currency, it also causes inflation.

Reducing metal in coins does not devalue currency. Reducing metal in coins does not cause inflation.

Or did you want to say price of 10gm of metal = Re1?

 

[sharktale1212]

Care to explain this statement.



Reducing metal in coins does not devalue currency. Reducing metal in coins does not cause inflation.

Or did you want to say price of 10gm of metal = Re1?

I already told you to look up two terms: devaluation and debasement. let me find that for you:
Debasement - Wikipedia, the free encyclopedia

Debasement is the practice of lowering the value of currency. It is particularly used in connection with commodity money such as gold or silver coins. A coin is said to be debased if the quantity of gold, silver, copper or nickel is reduced. Fiat or paper money is debased when volume of money printed is greater than demand. This reduces the value of paper money and causes monetary-based inflation. In contrast to commodity money in which each coin is changed, fiat currency only requires electronic or physical printing to decrease its value.

FYI, the effects are similar to printing more paper money. Devaluation and inflation both.

Quoting off your last post - "Most of our currency is not in coins or notes. It exists in electronic form, for instance in bank accounts." So then no devaluation on the money held electronically? Just hilarious. I can just say Wow! Thats something. Totally lost my appetite to discuss anything more with you. I give up, you are correct about everything you say.

 

[NinByChoice]

I already told you to look up two terms: devaluation and debasement. let me find that for you:

Debasement - Wikipedia, the free encyclopedia

Debasement is the practice of lowering the value of currency. It is particularly used in connection with commodity money such as gold or silver coins. A coin is said to be debased if the quantity of gold, silver, copper or nickel is reduced. Fiat or paper money is debased when volume of money printed is greater than demand. This reduces the value of paper money and causes monetary-based inflation. In contrast to commodity money in which each coin is changed, fiat currency only requires electronic or physical printing to decrease its value.

FYI, the effects are similar to printing more paper money. Devaluation and inflation both.

If you bother to read your own quote. Debasement is only for commodity money. Steel coins, like in India, are not commodity money.

So then no devaluation on the money held electronically? Just hilarious. I can just say Wow!

I never said that electronic money doesnt devalue. Please find my post that says so.

 

[sharktale1212]

If you bother to read your own quote. Debasement is only for commodity money. Steel coins, like in India, are not commodity money.

If only your comprehension was better. "It is particularly used in connection with commodity money such as gold or silver coins." It doesnt define it as only being applied to commodity money. Though Indian money system is fiat and doesnt have pure play commodity money characteristics, it doesnt really escape from all the characteristics of commodity money.

I never said that electronic money doesnt devalue. Please find my post that says so.

Going by the conversation till now. You did imply it when following up on the devaluation post:

^^ Wasnt sarcastic earlier. A Re1 coin isnt actually going to cost Re1 to produce. A Re1 coing doesnt have Re1 worth of gold/silver/metal. Just like a Rs1000 note doesnt cost Rs1000 to produce. It doesnt have Rs1000 worth of paper in it either.

Most of our currency is not in coins or notes. It exists in electronic form, for instance in bank accounts.

So, what was the implication of the line? Was it that all our money in electronic form dint take any money to produce?

That all said, I couldn't give a damn if you thought my thinking was funny. I made money shorting the INR after we had news of smaller coins back in July 2011.

 

[ultra vires]

So how do we decide who won this round ?? :71ec1979:

 

[NinByChoice]

If only your comprehension was better. "It is particularly used in connection with commodity money such as gold or silver coins." It doesnt define it as only being applied to commodity money. Though Indian money system is fiat and doesnt have pure play commodity money characteristics, it doesnt really escape from all the characteristics of commodity money.

Simple questions - If we switched all our metal coins to plastic coins will that devalue our currency? If we switched all our metal coins to paper notes will that devalue our currency? A "Yes" or "No" will suffice.

Going by the conversation till now. You did imply it when following up on the devaluation post:
So, what was the implication of the line? Was it that all our money in electronic form dint take any money to produce?

Implied nothing of that sort. Heres what I meant - Minted coins form very small part of our currency.

 

[pretttt]

@sharktale1212

Dude, the value of 1 Re coin has absolutely NOTHING to do with the amount/type of metal that is used to make that coin. I dont know why you even got that idea. Modern currencies dont work like that.

If we were to go by your logic, would the older & heavier 1 Re coins be more valuable than the newer ones which caused inflation? No, absolutely not.

BTW, the devaluation of Indian Rupee is not a completely negative thing. Sure, it makes importing oil more expensive, but it is beneficial for our export oriented sectors like software. Also, one of the reasons Greece is in such a bad situation is because they cannot devalue their currency now (since it is Euro). That is why there is a lot of talk that they come out of the euro and float their own currency.

 

[JuGGa]

^ In India, Imports >>> Exports, and its never gonna turn upside down. So, strong rupee will always be favoured.

 

[pretttt]

^ In India, Imports >>> Exports, and its never gonna turn upside down. So, strong rupee will always be favoured.

Yea, definitely agree with that. Rupee losing value is generally painful, but there some sectors which can benefit.

 

[JuGGa]

If anyway we could reduce our imports, then nothing could be better solution for growing India. *pray*

 

[pretttt]

If anyway we could reduce our imports, then nothing could be better solution for growing India. *pray*

Yeah, we can pray, but I would pray to increase exports instead. I believe this is what China did during 80s and 90s. Now, even though it imports way more than India, its exports dwarf all of that. Anyway, what India imports is mainly oil, which it needs any way, and that need will always go up, never come down. So, reducing imports is unrealistic.

 

[JuGGa]

Whatever it is, balance is what we need atm at least to maintain liquidity.

 

[sharktale1212]

pretttt , Buddy yes it does. Changing the metal content will lower the Seigniorage and prompts/force the mint to recall the coins -> There is an inherent devaluation. Example: a nickel currently costs 6.8 cents to produce. If the US mint was to re-mint it with a lower metal content/size. Say the newer ones take 5 cents to produce. Then by a nickel value is lowered by 26 percent . Same value but lower content.

There is no other text I can show you or NinByChoice to convince otherwise so leaving it at that. I guess agree to disagree.

 

[pretttt]

pretttt , Buddy yes it does. Changing the metal content will lower the Seigniorage and prompts/force the mint to recall the coins -> There is an inherent devaluation. Example: a nickel currently costs 6.8 cents to produce. If the US mint was to re-mint it with a lower metal content/size. Say the newer ones take 5 cents to produce. Then by a nickel value is lowered by 26 percent . Same value but lower content.

There is no other text I can show you or NinByChoice to convince otherwise so leaving it at that. I guess agree to disagree.

Yea, I guess we can agree to disagree.

 

[onlyravi]

This stuff is pretty serious. I think its time to save money and not splurge on SIII or IPADS.
Will have to watch next quarter or so very carefully ... This govt can just not be trusted....

 

[viva1986]

Yeah, we can pray, but I would pray to increase exports instead. I believe this is what China did during 80s and 90s. Now, even though it imports way more than India, its exports dwarf all of that. Anyway, what India imports is mainly oil, which it needs any way, and that need will always go up, never come down. So, reducing imports is unrealistic.

Most of our import is of oil and gold. In india gold is purchased for saving hence it is not producing any money after coming to indian market from overseas market. Thats why government is trying to cut down the gold import by implying some duties on it, which was strongly rejected by gold markets. And government takes their decision back on these duties.

Somehow we are also responsible for the current status of our Economy. Politics plays important role over Economy due to which our economy is bad shape. The opposition party always denies the important bills introduced by the current ruling government which must be passed at any cost. I am not taking side of any political party all are same and in unknowingness we also became part of their wrong politics.

I think time has come now for a great change in INDIAN politics. All political parties are worst, no one is thinking of our economy and our country, every party is waiting for their ruling time.
This time we need a new party who thinks above their house, relatives.