Saturday, November 15, 2008

A basket of Brinjal or an ounce of Gold

My parents during their child hood have used 'ana' (One sixteenth of a rupee), In my child hood I have used 'five paise', 'ten paise', 'twenty paise' coins, todays children may perhaps not even have seen them.

A few decades back one whole day living of a joint family used to get accomodated in a rupee or two. There was a period when people used to admire at "Latchathipathy"(owner of one lakh) as some kind of astonishing achievement.

During my recent trip to India, a kg tomato was about 50 rupees, land prices are just a few folds costlier than last year. On an average , be it a basket of Brinjal or an ounce of Gold, prices and living cost have been ever increasing. "Inflation" an uncertainty that can affect drastically any economy is affecting every one, especially the developing and poor countries. The value of a currency ("purchasing ability per unit of currency") is decreasing every year.
I am not a technocrat of economics, and there can be numerous factors that influence inflation rate, but in my opinion the very basic issue that acts as a root of the whole problem is the present "Interest based financial system" we are following all over the world.

A man lends money, does no effort on his behalf but expects a higher return ...
" money --> NO effort --> more money return --> decrease in the value of money "

icher gets richer , and finally all the burden falls on the back of poor lying at the very end of the financial chain. Unless the financial system is changed from interest based to investment based (invest and share both the profit as well as the loss), the value of money will keep decreasing and the burden on the poor will keep increasing for ever.


-=A.R.N.=- said...

I've read somewhere that the biggest problem with inflation is that legally the problem does not exist.

One rupee today is legally worth only one rupee tomorrow or 10years from now and there is no law that states that 1rupee today = .67rupee two years from now.

Of course, you've hit home base with the actual cause for inflation: Riba...and the fractional reserve lending system that this is based on.

Rayees Ahamed said...

That is absolutely true bro, thanks for pointing the right technical term ...

i have added one more diagram in the post, actually thought to put the figure of pawn broker saettu, but it may indirectly point a particular community ...

Rayees Ahamed said...

The increased burden on the poor by the interest based financial system made me think of a few verses of Quran,

"Spend in charity;lend to Allah a beautiful loan"
and the vice versa is

Usury (that burdens the poor),rages WAR against Allah and His messenger

The Bollywood Lover said...

10 years back, children used to be happy with 1 rupee. Today, they'll be happy only with 100 rupee, that's the change.

And the anaas are not known to everyone (including me) today!

Its a big change, isn't it?


goyalbb said...

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Ela said...

ore technical write up than poo! yeah it's true, that such inflation direly affects the poor people who are already struggling to keep up with the three meals/day stuff!

Rayees Ahamed said...

@ saurabh

yes, children pocket money starts from the minimum 100. forget the children, you know what, the beggers have also amended their legislative limits as per inflation and they are only happy with currency notes. soon they may beg with a sign board "strictly no coins please" ..

@ goyal

Thanks for dropping in, and i will be happy to know about educational institutes.

@ yekkov,
technical ellam illaye , namakkum econimics kum rombo thooram, sometimes i do read this subject.

Rajkumar said...

Stumbled upon your blog and this post looked intresting. I have not read Koran but my understanding of why "lending for intrest" is looked down is as follows.

When lending for intrest you judge people (repaying capacity). When you judge, you treat people differently, while in eyes of God all are equal. Its the act of treating people differently that the religious books frown upon.

Now if instead of lending my surplus money, I buy a house and let it out for rent I would still be earning money without any effort. Then renting your house is as good as lending money.

(am neither an expert in religious texts or economics)

Rayees Ahamed said...

Thanks for dropping in Raj. You have hit the bulls eye, The way a human judges at another human is entirely different.

What i was trying to point out was, The rate of interest increases along its journey from Rich to Poor, finally all the burden falls on the backs of poor, whose efforts are valued far far less than the value of the efforts of the rich.

Renting a house: Every house has a life (say 50 years, for today's concrete), The value of the house is time. Selling this time is merchandise, in the same way as selling a basket of brinjal in the market.