Apr
29
India was one of the earliest issuers of coins since circa 6th century BC. Indians never used paper currency before 1770, when the Bank of Hindustan under British Empire. The General Bank of Bengal and Bihar, which was established by Warren Hastings1 , also issued paper currency in 1773. It should be noted that Indian currency is known as Rupees since long. Rupee is derived from a Sanskrit word “Raupya”, which means silver, the silver coin was always the currency of India. With the discovery of vast amounts of Silver in U.S and other European colonies, the relative value of silver reduced a lot in comparison to gold, that incident is known as “the fall of rupee”2 .
With the fall of silver in 1873, Indian Currency Committee suggested British India government to adopt for gold standard and in 1898 British government instead of adopting a Gold Exchange Standard, pegged Indian rupee with British sterling.
After Independence, Indian government started minting Indian coins (rupees); Indians thus never got a gold standard for representing their money
Now since last 63 years, Indians have so much used to the government issued currency, cycles of inflation and depression and always increasing price rise, that even talking about gold standard and private coinage seems to be impossible. Yet, since Indians were in habit of using private monometallic coins in past, it is imperative to discuss the issue of private coinage. Taking the premises of Freedom for everybody and the Self-Governance (Swaraj), which has been extolled by the Indians as a basic Mantra of life, let us examine the case of private currency carefully.
How the Private coinage will work?
The private coinage will work just like any other commodity (say mobile phones, or jewellery or wrist watches). Minters will produce coins of different shapes, sizes and weight according to the desires and demand of his customers. The free competition of the market will set the price of the coins of the minter. Second issue is about the trouble that the coins may create when weighed or evaluated at every deal or bargain. It is true that it would be difficult to evaluate the purity of gold coins every time a transaction would be made. To solve that issue, the minters will stamp the coins and guaranty the weight and purity of the coin. Private minters can guarantee the coins just like the government do. The profit will be, when government mints, there is no competition for government to be truthful, alert and honest, it is monopoly of government over minting coins, but when the private minters will guarantee their coins, their guarantee will weigh more because if the private minter will cheat, he will loose his market and consumers to other honest minter. Just like a government paper currency or coin holds the governmental promise to pay the bearer of that note an amount equal to the price of that paper currency or coin, the coin of private minters will also hold the promise from the minter that he would pay an amount of gold equal to be mentioned on the gold coin of his brand.
People against the idea of private currency will say that it would increase the chances of frauds. Same people never object to the miserable record of the governmental frauds, swindles and mismanagement. Every time the government issues stimulus to a particular industry, or forgives the loans of some conglomerate by explaining that it is working for social profits, the government actually is committing a fraud against the general public. Every time a person faces the devaluation of his savings in governmental currency because of extreme price rise and inflation, it is the example of regular fraudulent and untrustworthy behavior of the government regarding paper currency issuance and minting coinage. In case of private minters of gold coins, the chances of inflation and abrupt price hikes will lessen to minimum. More over, the free market competition for consumer satisfaction, the various minters will compete to be more honest and better customer service providers. The more a particular private coinage minting agency will be honest and better product and service provider, the more will be its consumer base and profits. Thus, in free market private coinage system, the competition for profits would be competition for honesty and consumer satisfaction. In addition, the problem of fake currency will also be eliminated because each private coinage agency would try to defend their brands by their own and the government also will be able to devote all its energy to safeguard the private minters against duplication and fake currency. In case of private coinage, one can trust that the government will prevent and punish frauds. The integrity of private open market operators cannot be discarded in favor of government monopoly, because in case of monopoly, there is no need for the government to be honest, but in case of private free market operators, to be honest is prerequisite for gaining any profit and healthy share of consumers.3
Furthermore, whole market works on guarantee of standards. A medicine store sells a tablet of aspirin of mentioned weight and dosage, a butter seller sells packed butter slices of mentioned grams of butter. The buyer trusts these guarantees, and they prove to be true. In a case when a person buys a product with a certain warranty and guarantee and somehow the product fails to prove the standard mentioned, than in most cases, he gets a replacement for the ill-manufactured product. That is, even if by mistake a product of a company fails to fulfill the standards demanded by the customer and provided by the manufacturer, then either it pays back the money of the customer or replaces the product with new and better one. Market of mobile sets, or laptops or packed meat, butter or cheese, or other things does not fail even though government does not hold a monopoly on any of the products. Thus, we can trust that the customers of a private minter will be safe against any possible fraud because of the presence of other competitors of the minter in market. The minter’s customers themselves will be keenly alert about the weight and fineness of the coins just as they remain while buying and using other commodities.
The problem of wear and tear of currency
The current government regulated currency, paper notes and coins holds no worth in themselves apart from the governor’s pledge to pay the bearer of the note or coin, a definite amount of money. The value of money obviously keeps going low and lower because of inflation and price rise. Along with this, the paper currency issued by government often suffers wear and tear causing further loss of money. Most of the governmental coins are eroded or torn out and government keeps forcing the usage of same old notes and coins. The old rag-tagged coins and paper notes are to be considered of the same value as of a fresh note or coin. By doing so, the government actually forces a certain type of price control over the old paper notes and coins and provide them the equal price as that of newer notes and coins. Because of this, the older coins and notes are overvalued, while the new notes and coins suffer undervaluation. All this amounts to nothing but mal-investment. Everybody loves to circulate the older worn out coins and paper currency while they have a tendency to keep newer notes and coins safe.
Consider the case of free market where minting of coins is not a monopoly of government. Assume that there are gold coins of 10grams well circulated in market. After a few years of constant usage, the coins may suffer wear and tear and lets say that they weigh only 9 grams of gold after 10 years (assume). In a free market, a coin that has been reduced from 10 grams of gold to 9 grams will not be overvalued and it will gain only the price of 9 grams. Obviously, nobody would like to use the 9 grams coins at the price of 10 grams of gold, hence the worn out coins will be driven out of the market, or they may be used at reduced price. Thus, nobody would be deceived by the forced insistence of overvaluation to the older coins. This will avoid malinvestment. To solve out the problem of wear-tear of the coins, the private coin minters can either set a time limit on their stamped guarantees of weight or agree to provide a new coin in exchange of every old coin with reduced weight. Thus, there will not be any compulsory standardization of currency, which is a feature of monopoly of government.
Conclusion:
Since long governments have tried to control the currency circulation in market so that they can restrict and control the progress and prosperity of citizens. Yet, from time to time, private bankers have issued their own minted coins (Know more about Private Coinage and Good Money)) . The gold standard with privatization of issuing currency and minting coins will not only end the monopoly of government over currency, which is the major reason of acute price rise and inflation, but also it will avoid any chance of fraud as the free market will tend the virtue of more honest and better services for gaining more consumer base and high profits. In addition, if coin minting is privatized, the government can also try to serve the public by ensuring security against any sort of fraud. In any case, privatization of currency would be a much better option than the monopoly of government over currency.
http://couplewriters.blogspot.com/
- Warren Hastings (1841), an essay by Thomas Babington Macaulay.” Columbia University in the City of New York [↩]
- The Fall of Rupee, CRN India [↩]
- Know more about the evils of Monopoly of government in Market and currency read What Has Government Done To Our Money by Murray Rothbard, One may listen the whole book and save the audio link here [↩]
21 Responses to “Golden Coinage in India”
Leave a Reply
August Says:
April 29th, 2010 at 5:17 pmHow would a private coinage be introduced in the market? Meaning, how would the private minter holder trade golden currency with people? The company would definitely put a higher price of the currency than the actual raw gold. So, how would the standard rate of a particular coin be decided?
Gold made jeweleries are always costlier than raw gold. With heavy supply of golden currency, jewelers would start converting the currency into jewels. It would create shortage of currency into the market.Though, I believe this problem would be solved with appreciation of market value of a coin.
Gopi Krishnan Says:
April 29th, 2010 at 10:36 pmIs it only through the price increase that the people will be able to judge the honesty of the private minters? Won’t it be better to have a law by which the private minters are supposed to be transparent about how much money they have printed in a period and the amount of gold backing those currencies?
Unpretentious Diva Says:
April 30th, 2010 at 1:19 am@Gopi
That doesn’t make sense. Making such a law will only provide government and politicians to conspire frauds, blackmail, harassment and bribery.
Soon some conglomerate will make business relations with some political party, will campaign for their election, will make lobby and will start misusing the law, robbing the innocent citizens.
Interference by government causes Corruption. The only law applicable is, government will NOT interfere in market by any means, by any such law.
Unpretentious Diva Says:
April 30th, 2010 at 1:28 am@ August
That is not a big deal. If only a few (selected by government) companies decided to launch their own coins, than it may be the case that the big companies will try to rob citizens by the help of Government (sanctions).
But if the whole process is left free to the free market, than the possibilities of higher prices of gold coins will be minimum because of the market competition. Every third person will start using his/her collected gold to make coins and sell them. In fact if India adopts gold currency, it won’t be a surprise that India may emerge as the strongest economy, because then, much more people will have currency to Invest.
By nature Indians hold gold much more than Government currency. If that gold is allowed to be used freely, much of poverty and restrictions of middle class will go away.
About how will the new gold currency will be adopted by the market, well that also is no big deal. Even now any body will be more than ready to take equivalent gold (rather than Government currency) for a bag full of rice, why? because gold is more stable form of money. At what rate, the gold coins can be exchanged? One may start with the present/current rate of gold in world market. Obviously, the rate of gold will go down because more and more people will start pouring their saved gold in market.
Gopi Krishnan Says:
April 30th, 2010 at 1:32 amso then how would a common man like me know when a particular private minter is debasing his currency? Is the rise in price of all commodities in that particular currency the only way to find out the dishonesty of the private mint?
Gopi Krishnan Says:
April 30th, 2010 at 1:36 amSome related interesting facts :
India’s private gold ownership is difficult to determine accurately. However, several websites such as Gold Eagle estimate the total private gold holdings to be about 15,000 metric tons. Compared to that figure, the Indian government owns a negligible 360 metric tons of gold. Given that total gold mined in history is about 160,000 metric tons, India’s stake then amounts to 9.6% of the world’s total gold stock. In contrast, India accounts for just over 17% of the world’s population. Therefore, India’s large gold ownership is just a function of its large population and its per capita gold ownership is well below average.
While India’s per capita gold ownership is well below the world average, there can be no doubting their desire to own this metal. Demand from India consumes some 20%-25% of annual gold output. Much of this desire to continually acquire gold dates back almost 4,000 years to the Indus Valley Civilization.
Unpretentious Diva Says:
April 30th, 2010 at 1:42 am@ Gopi
Don’t fool yourself with the per capita numerals.
Around 200 to 300 Indians are billionaires, and many millions are under poverty line in India. So you see, even at Per capita lines, India is in deeper turmoil right now.
Gopi Krishnan Says:
April 30th, 2010 at 1:42 amThere is also the practical difficulty of gold coins being heavier than paper. So, a paper currency fully backed by physical gold would be a better option than gold coin itself, don’t you think?
Unpretentious Diva Says:
April 30th, 2010 at 1:45 am@ Gopi Kishan
I have already mentioned that issue, Instead of paper money (which can tear away) the private minters can use standardization on lighter gold coins, providing the guarantee of a definite amount payable on that coin.
Coins are always better option than Paper currency (even if it is backed by gold standard. Obviously, a lighter gold token backed by definite amount of gold, is much better than a a paper note that can be washed away while you get drenched in the rainfall.
Unpretentious Diva Says:
April 30th, 2010 at 1:48 am@ Gopi
Why are you more willing to trust the DISHONEST government and Politicians, while you are not ready to trust the Private minter who will naturally be forced by the market competition to be HONEST?
A private minter cannot afford to be dishonest, because whenever it will be discovered that he was cheating, he will loose everything he owns in the market.
Take a look on Raju, Nobody is gonna deal with him, he is a known traitor.
Now tell me, why are you wiling to believe the government, even though it is beyond any doubt that government is fraud?
Gopi Krishnan Says:
April 30th, 2010 at 1:51 amWho says I believe in the Govt? It’s that people are forced to believe through legal tender laws. But I was just pondering on how to make the system of private currencies more… fool proof
Why a country cannot issue currency notes as per his willingness and why their is restrictions on this ? Says:
April 30th, 2010 at 6:51 am[...] Golden Coinage in India | Reason for Liberty [...]
Gold And Silver Home Business – The Future Of Network Marketing Is Here Says:
April 30th, 2010 at 10:41 pm[...] Golden Coinage in India | Reason for Liberty [...]
shumit Says:
May 1st, 2010 at 8:48 amOur current global economy is run on a debt-money system where the international banking cartels (IMF, world bank and Federal Reserve bank in the US) basically keep printing money to satisfy demands, but in the process devalue currency as it stands.
The banking system as I understand it relies on a fractional reserve system where banks use every unit of currency that they hold, to justify loaning 9 times that amount out to the debtor. They then rely upon the debtors returning that primary loan + interest that accrues. In this way, banks turn over huge profit by forcing the debtor to hand over more money than they borrowed.
This creates an infinite loop where there is always less money in circulation than the required payable amount of (primary loan+interest). The only way out is to print more money and devalue the currency even more… and allowing the possibility of comedy instances like multi billion dollar bailouts for banks…
Issuing controlled currency from private sources, where money actually represents a fixed quantity or commodity to be traded is probably the only way to free our society from the nightmare of the debt-money system. This system prevents the unlimited printing and minting of currency and helps control the value of the currency in circulation.
However, this is a direct threat to the banks and money lenders who make their living out of reaping the profits of all the interest they are charging on the loans they are giving out. Countries starting their own currency would be a direct threat to the empire of the Federal Reserve and other money lenders. I doubt it would allow such a system to exist for long.
Zach Bell Says:
May 8th, 2010 at 4:04 amPrivate currencies are absolutely wonderful. They wrest control of monetary price action away from governments and put that control firmly back into the grasp of the free market. The United States at one time had upward of 10,000 private currencies, many of them trading at par or even at a discount.
Something that’s not mentioned much here is how private money increases competition and benefits the consumer. Suppose that retailers desire a particular type of currency due to credibility; they may offer customers a discount if they pay with that particular currency. This is an example of how that currency actually starts to trade at a discount.
Rather than tie currencies to metals though, private currencies could conceivably be tied to anything. It’s up to the consumer and general market to either accept or reject that currency. When the Souther States ceded from the American union, they attempted to back a confederate currency with cotton. Unfortunately for them, their cotton market collapsed and the confederate currency turned into a failure but it’s a demonstration of how a currency can be tied to anything. If the market accepts it, the currency will work but if it’s rejected, of course it’s destroyed just as it is supposed to be.
.-= Zach Bell´s last blog ..Creativity! K Haz It! =-.
Electrified Says:
July 29th, 2010 at 6:28 amin response to Unpretetious Diva’s first post:
Considering the Federal bank(a private org) has the whole world in a strangle hold…is it resonable to assume a private co can be trusted?
Unpretentious Diva Says:
July 29th, 2010 at 10:52 amFederal bank can not be private org. Federal Bank of US too is a governmental authority, so is RBI.
Your secon assumption that a private organization holds the whole world is unrealistic and impossible to happen. The only way to have such huge powers on whole world or a part of it (like totalitarian government (monopolic or democratically monopolic)) is to have proper politico-religious and socio-economic control by a working system of government. If there is no government, there is no way to have such a big monopoly.
Electrified Says:
July 29th, 2010 at 2:49 pmThe federal bank “loans” money to the government at interest?
If government was the real authority, would that be happening? How can Rockafeller’s oil company fund both sides of WW2 if the government was really an authority.These are my findings from various sources, so i may be wrong and i’m willing to learn if i am.
About my second assumption, government is merely there to give a false illusion, to provide a mask under which the banks/corporates can hide and execute their shady deals…Also as per my knowledge, the implementation of a central bank as a law(Federal Reserve Act) was originally written by bankers & not law makers…which was then passed by Woodrow Wilson. There is a famous writing from him in regret thereafter, you can look it up if interested.
“The Real Truth of the Matter is that A Financian Element in the Large Centres has owned the Government since the days of Andrew Jackson”
- Franklin D Roosevelt
Unpretentious Diva Says:
August 1st, 2010 at 6:02 amGovernment never pays it back. Furthermore, federal bank may advice government to not to take loans, or to grant loans to others through Stimulus packages, it cannot deny. Government ultimately controls federal bank.
Government is virtual authority, doesn’t make a difference. furthermore, you are missing the point. Federal bank itself is a monetary government. It denies any other bank the freedom to provide its own issued gold coins. Federal bank controls all the economic activities of US, RBI controls all economic activities of India.
Monopoly is bad, Government/Federal bank, both are monopolies, real bad evil things.
It was an oil company with a freedom to invest its money. Why won’t you invest your money if you know it will provide good returns?
Lol, no other thing is possible in a state system with government. Nobody can really deny the profits that bribery can provide.
Electrified Says:
October 15th, 2010 at 11:05 pm“Government never pays it back.”
you are missing my point, if government was an authority it should NOT loan money in the first place.
“federal bank may advice government to not to take loans, or to grant loans to others through Stimulus packages, it cannot deny. Government ultimately controls federal bank”.
you seem to be living in an illusion, which is fine, but dont talk like it is the truth. Federal bank “may” do that, but why hasnt it done that?
“Government/Federal bank, both are monopolies, real bad evil things.”
That was my point all along.
“It was an oil company with a freedom to invest its money. Why won’t you invest your money if you know it will provide good returns?”
Why woudnt i?? right?? but the company’s owner is a US citizen! So if tomorrow Taliban wants to wage a war against US…would it be fair to financially support them just because you are a profit making machine!!! and dont get me started on how Rockafeller became a profit making giant!! gosh! i dint know you were a pro-profit, self centered ppl.
you are being an hypocrite just like the companies your talking bout…when US starts a war against Germany….is it humanly acceptable to support your enemy so that you can make profit?? For the head of the company is a US citizen and he has his “supposed” values based on humanity atleast if not nationality…atleast in an ideal situation.
So what you are telling is just because companies sense profit in a war they can support either sides of opinions & hence get richer themselves…all the while ignoring their own “moral” standards….see this is the showcase of ignorance… which speaks of your real life experience.
“Lol, no other thing is possible in a state system with government. Nobody can really deny the profits that bribery can provide.”
That is pretty obvious, i was under the false impression that you were gonna suggest an alternative. too bad.
Roy Says:
October 26th, 2011 at 9:26 amOne big selling point (IMHO) for privitization of money:
Suppose there are 3 competing mints (Mint A, Mint B, Mint C)offering various options. Let us suppose that Mint B succumbs to temptation and attempts to defraud it’s product.
Not only will it be discovered and Mint B lose it’s business – there stands competing interests Mint A and Mint C to step in and pick up slack.
Under our current system, if (I mean ‘when’) the Government inflates the currency – the ENTIRE population of the country loses; whereas in private system, only Mint B customers would lose. Thus, losses are limited and all productivity is not lost.
A true monopoly can only exist in two cases:
1. If all customers are satisfied with the product being offered, or
2. Through force/coercion.
cheers,