Money... have you seen what you own lately?

Gandhi Bapu ka note... karara.. mast... kharachne ka jee kare... i promise to pay the bearer a sum of rupees 500 ... issued by the RBI, signed by the governor of the RBI... you pr0omise to pay me a 500 bucks... really... wow.. what a great feeling... you promise to pay me 500 rupees... ok tell me when are you really goin to pay up... do you have it at home... maybe i can come and pick it up on sunday... or is it in the vault of a bank.. in that case sunday being a weekly holiday for banks... lemme pick it up on monday... or better still why dont you keep it as a loan from my side... just pay me a modest 11.5% PA... oh sorry make that 12.5% ... now that the RBI and the FM have finally made up their minds about the CRR .. now at 6.5%. The cash reserve ratio .... the percentage of cash every bank must keep in its vault against the deposits it recieves. Its mind boggling that the bank needs to keep only 6 rupees 50 paise of every 100 rupees i deposit... it can lend out the remaining 93 rupees 50 paise ... which is not its money ... legally!! Imagine the situation ... from my 100 rupees the bank can create according to my calculations more than 1000 rupees of fictitious money.... i deposit 100 ... suppose say my sis takes a loan from the bank... of say 93.5 rupees... and again pays another person who holds an account in the same bank... the sum now becomes 100 + 93.5 = 193.5 rupees. Out of the new 93.5 rupees the bank can lend out 87.42... and so on ... so the series becomes ... 100 + 93.5 + 87.42 + 84.74 + 74.43 ....

Sum( x ( 1- CRR/100 )^n) (n 0 to infinity)

where x is the initial deposit amount ... and for a CRR = 6.5 my 100 rupees becomes ... ( someone help me out here... i cant really calculate it... its been a long time.. :) )

A total detachment is created between the actual wealth and the amount of currency i.e. promisary notes printed... The money just ends up becoming numbers on computers. When have you last seen all of your money at once... There is always some amount of our money existing in mere numbers on computers.
Now lets suppose the initial sum of 100 rupees I deposit is from a loan i took against my property. Suppose my land valuation is actually only 10 rupees and I get a false valuation done on it of say rupees 150. I tell the valuator that i will pay him 30 buck and the bank manager 20 bucks to keep their mouths shut tight. They both agree.... and i happily deposit 100 bucks in the bank. Now even if I choose to screw up, there is no loss for me. The bank seizes my land that is actually only 10 rupees which i had kept as collateral against the loan, i still make a profit of 90 rupees. What can i do if the land value has gone down since i took the loan. Heeehhahahahhheheaahahhaha ... bank go to hell, RBI print me some new notes !!!! Slam bam thank you maa'm. If the bank manager is a lady ofcourse. Bye bye baby... the whole credit system was built on a reaaaalllly shaky foundation.

Suppose i owned 5,00,000sqft of land and the actual cost per sft is 1000, i get it valuated at Rs. 2500, bank lady take 100, valuator take 50, (since the lady is good lookin, i changed my mind and gave her a bigger slice :) ). Bank lady gets 5,00,00,000 (5 crores) enough to keep her mouth shut.... and valuator uncle gets 2,50,00,000 ( 2 and a half crores ) enough for him too....!!!! Balls to the land, i still make a profit of 2500 - 1000 - 100 - 50 = 1350*500000..... 67,50,00,000 (67 crores and 50 lakhs..... commision free!!!! ).

Now suppose the collateral was some shares i own in some XYZ company which has had a real mysterious bull run recently... phew, boss... i think we can leave this for a later discussion.

Just imagine that... think about where your money is right now and whats its doin... have you seen it lately... it might just be helpin in creating some more infaltion. Boss make CRR = 100 and all this natak baazi will stop. Lend out only how much you own and then see which way infaltion is headed.