One Rupee was all I wanted for lunch at school during my early school days, enough to buy me one bag a chips, and three Rupees for Thursdays to enjoy Pepsi. This wasabout two decades ago. Today a bag of chips cost Rs7 and Pepsi Rs20. So what happened? Am I getting 7 times the amount of Chips or Pepsi? Or is it my money worth less? This one’s pretty easy to answer after enjoying Pepsi. If I had saved those Rs3 from 20 years ago, it would have lost86% of its value today. So how did this happen? How did the value of my Rs3 erode away as time went by? Where did the purchase powergo? To answer this, we will have to understand Money and the role of Central Banks.

Money is a medium for markets to unitize goods and labor. It is a pricing mechanism to signal abundance or scarcity of certain goods or labor available in the market. If this abstract idea is understood correctly, no government or economist can fool you. The value of the whole money supply reflects the goods and labor (and its potential future growth) in that economy. Morenotes added into circulation do not add to value of money as a whole. In fact it does just the opposite. The existing note loses value as value is shifted from the old notes to new ones. This is key to understanding today’s Economic scam. Universities call it Keynesian Economics. The newly issued notes resets the pricing mechanism in the market. Commerce slows down till the pricing adjusts to accommodate the newly added notes. Inflation encourages hoarding which results in food shortages, and discourages savings which is the soul of Economic growth. Run away from an economist who says Consumption is the path to Economic growth. Production is! The more a country produces, the more there will be good to go around. Increased production increases the value of money and reduces poverty. In principle, if the amount of money were to be left unchanged, value of money would continue to rise and things would start to get cheaper.

So why dont we ask the Government to simply balance the budget? Afterall, every household in Pakistan has to live within its budget. You see every time your government offers you something free, run away! If people only knew how expensive government provided free stuff is, they would never buy those arguments. Governments also play tricks of divide and rule. Governments pander to minority groups and play the ‘prisoner’s dilemma’. The collapse of moral standards guaranties a failed generation for future. Look around and you will witness it. Thank Bhutto’s socialist policies.

20 years ago US$ was less than 30 rupees. So the hard currency exchange rate depreciation is about half of your Pepsi Chips inflation. I guess the revenue collection system being what it is, governance driven inflation is the the manner of fiscal collection indirect taxation.

Perhaps you should have saved your rupees 20 years ago as dollars as prolonged use of pepsi and chips may lead to diabetes and cardiac issue or as the government may say the ruse in those prices is just to protect you from these diseases an indirect health tax!

I work at SBP should share your views in front of our Monetary policy director, he will tell you that your assumption is based on keynesian thought only when much of research supports Monetary economics as well are just looking at the supply side economy operates at full capacity, firms respond to increased demand by charging higher prices requires monetary easing because capacity cannot be increased in short term in Pakistan case the problem is fiscal dominance overpowers SBP policies we can just say we wont print money for you would you feel if your government defaults on rupee denominated obligations???If will fail to be called as as per se!!!Plus you should speak with Dr Hamza Malik or Mr. Riaz riazuddin will teach you some advanced economics in much easier words than yours too is Mon Pol Director and latter is chief economic advisor!!Our BloggersStop Killing the Burmese Muslims!Write a blog10 Things I Hate About BollywoodSecurity Threats for London Olympics 2012The Clash with the CouplesInterrupted by PoetryIs Malala a Conspiracy?What are Imran Chances?

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