पैसे पेड़ पर नहीं उगते! Money does not grow on trees!
But what if it did?
There is an old adage regarding this.
And in case you are wondering, it is exactly on the lines of socialism vs. capitalism.
Let's say the world has exactly 1000 people and 1000 chickens.
There is massive inequality - someone has 200 chickens, someone with 5 and almost 400 people have no chickens!
OMG! So unfair.
How do we level the playing field for everyone?
Well, in order to do that, we do a one time hard reset.
A hard reset where everyone gets one chicken.
So the guy who has 200 will NOT be happy, and the 400 people with no chicken will be delighted.
Well, the problem gets solved - everyone gets one chicken.
But that is a very temporary answer.
There is always a catch.
What's the catch?
Some people will cut the chicken, eat it and be hungry tomorrow.
Some people will wait for it to lay eggs (after of course finding a male chicken), eat the eggs once laid and then eat the chicken too.
Some will wait for the chicken to lay more eggs, eat a few, let a few hatch, and wait for a few other to continue to grow and well multiply into more chickens.
So, did the reset help?
Well, for a few days but after some time it got everything back to square one.
After some time, some will again have no chickens, some a poultry farm and some will have enough to take care of people around them.
Capitalism also has an element of Darwanian theory of evolution.
What if we print more money?
The construct here is that only the central bank is allowed to print, we live in a civilised state and there are regulations all around.
We find a hack to do it and start printing money 'outside the system'
We start fulfilling our desires, stop working and start buying more stuff. Suddenly, there is more money chasing the same set of products.
The grocery store guy cannot start magically selling 100kg of wheat if he was selling 20kg earlier.
The producer cannot suddenly start harvesting more grains to make more wheat. Demand shock suddenly cannot be met with supply.
The result - Increase in prices!
The wheat you were buying earlier for 50 rupees is now worth 250. You go back home, print more money and show up at the store. Only now, the price has again sky rocketed to 500.
Now you must be wondering - all of this sounded good on paper, but in the real world does not have great implications.
But what if I told you - this is EXACTLY what central banks all around the world continue to do!
That's how INFLATION keeps getting manufactured year after year. While there is a method to the madness if things are done in a calibrated way.
Ensure adequate supply, see demand drivers and then take action.
Any extreme movements, lead to extreme outcomes. Coming back to reality, the only money printer in the country is with the Central Bank.
The only mode of exchange is the currency backed by the sovereign.
Printing more money may cause excitement in the short run. If done 'outside the system' it will lead to criminal implications. If done by the banks aggressively, it will spiral inflation out of control.
This was published earlier on Twitter. In case you do not follow me there, link to access the tweets are below:
