Cash to my right baby. Cash to my left baby.

by sidin in , ,


Unfortunately time pressures and a laptop less Sunday means I have nothing original to blog about for the time being. However I do have the latest Businessline column to cross-post. Sneaky third-rate manipulation of regular readers no doubt. But better than nothing no? However expect a blog post about the successful completion of the fabled GM diet last night and the ensuing feeling of hilarity at slightly better fitting jeans and shirts that have more room (not quite flapping around me in the wind yet.)

Over the weekend a few people had the idea that I must select a cross-section of my blogs/columns/whatever and publish them in book form after duly groveling around for a publisher. There was a show of hands in favour of the move. I continue to dilly-dally.

And finally, if the powers wills it and a visa and ticket are forthcoming, a four-day dash and splash to Malaysia (Truly Asia!) is in the offing. KL and Genting to be precise. Do drop hints on how to make maximum use of my time in a way that I can tell all about it to the missus when I return. Is there a desi-blog crowd there by any chance? Will blog from there if all goes well of course. And will keep the Petronas pics to a minimum.

Without further ado on with the column and off I go kicking off work for the next issue of JAM.

---*---

(The version you see in the actual newspaper is different from this for pretty obvious reasons.)

What is common to the words dollar, pound, dirham, rial, peso, gourde, ouguiya and ariary?

Cash PosterIf you thought "Hey! These are all funny sounding words that appear right in the beginning of a humour article in a major Indian business daily published out of Chennai!" then, technically, you think right but I sincerely hope you are not involved in a business function other than HR.

In reality these words are all names of currencies of various countries all over the world. And why am I talking about currency today? That is because in today's column we are going to learn a little bit about the concept of ‘currency', how it evolved and how currency, in theory, and money supply, in practice, is extremely critical to the functioning of an economy like India's and even more so in mine.

Let us start with the basics. Currency is as defined as a unit of exchange that facilitates the transfer of goods and services. Or, as us humour columnists put it, "That wonderful thing that all the people with regular jobs seem to have a lot of and which is the primary reason we make friends with people in the banking and investments circles who have expense accounts."

Currency, or money, in paper and metal form has become such a part of our daily lives that we tend to completely forget about it and take it for granted. Then suddenly, one dark and gloomy night, we are traveling in a cab to our homes and suddenly remember that we haven't carried our wallet. In fact we don't even have a wallet. We then tell the cabbie to stop under a tree a few minutes from our home in order to relieve ourselves in peace. We then walk a few steps before breaking into a mad dash for our building. We have managed to escape somehow.

The above was a completely fictional incident made up for the express purpose of this column. But it brings out the huge role that currency plays in our lives.

Now before the advent of the concept of currency man had a terrible time trying to buy and sell stuff. A typical conversation between a shopkeeper and a customer would be as follows:

Customer: "Two apricots please!"

Shopkeeper: "Here you go! That will be four dollars!"

Customer: "But this is before the advent of the concept of currency dude..."

Shopkeeper: "Dammit!"

Of course I am exaggerating here. In reality that period in history saw the widespread adoption of the barter system whereby people just exchanged things with each other. For instance you might get two horses for forty chickens. (Twenty-five chickens if the horses were Chinese.)

But this led to several problems.

First of all you sometimes never found someone who had horses to exchange for your chicken. But you found someone who had pineapples and wanted chickens. So all you needed was a guy who wanted pineapples in return for horses. Alas, then you found someone who loved pineapples but had only, say, primitive table lamps to offer. So a lot of people ended up hanging around for hours at the market. This alone slowed human progress by several thousands of years.

Secondly you could never store your goods for use at a later day. So while the other guy had horses that he could keep for months you had to barter potatoes that, after a week, began developing fungus colonies the size of horses. This led to tremendous amounts of business rivalry and even industrial espionage. Then finally, after years of lost trades and bad produce, tradesmen struck upon the concept that would change business in the world forever, namely credit period.

"Thanks for the bananas man! Your cheque will be here in just three days!" the evil trader would say. "Sure! No problems boss!" his counterpart would reply feeling very confident, "I am sure you are a man of your word!" The trader would then ride away to a safe distance before letting out a loud evil laugh (Muahahaha) because, ironically, banking was still several centuries away.

Thankfully before long the people of ancient Egypt came up with the idea of currency to help in all financial transactions. They used silver ingots to represent an equivalent value of stored grain. This way the value of the silver and the ingot itself was standardized.

Egyptian paymaster: "Here take this silver ingot you builder!"

Builder: "Wait a minute! Is this some sort of pyramid scheme?!"

The rest, as they say, is monetary policy.

Later on the Chinese began to get a little sick of carrying around coins and decided to substitute it with paper money. Before long wallets became an essential part of Men's fashions and people were circulating banknotes with little poems on them with words that often rhymed with ‘pluck' or ‘crass mole'.

Today currency plays a less visible but an all the more important role in our daily lives. Sure we have Debit Cards and Credit Cards that no longer necessitate the carrying of coins or paper money. But without a well managed currency system an economy is in shambles.

For instance if the currency is easy to counterfeit then the market could easily be flooded with copies. Suddenly people use this fake money to buy things and this can actually push up prices due to greater demand. The same thing happens if the people in the government indiscriminately prints notes and mints coins, takes this currency into the market, walked past the junction, behind the post office and into their homes where they spend it at leisure.

Exchange rates are another interesting outcome of national currencies all over the world. Because the value of a currency is stable at least for short periods of times the concept of an exchange rate took shape. This kind of stable currency system is essential for World Trade.

And last of all the currency system led to the development of banking. Banking played a vital role in the development of human society. They helped businessmen, traders, consumers like you and me and, most of all, investment bankers like the guy who has just called me out to lunch at a swanky new Five Star here in Mumbai. He is been behind me for weeks now and waxes his eyebrows. But what the heck.

So I must run now. I hope you enjoyed this little recap of currencies and how they help make our lives better. So the next time you pick up a thousand rupee note and spend it on an insignificant thing like dinner, clothes or life-saving drugs, pause for a moment. Think about the many millennia of evolution that has made that particular note reach your hand. Wonder at the ingenuity of the human mind.

And then send the note to my address.

---*---