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    Moderator Crown Brahmanyan's Avatar
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    Aug 2011
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    Default Money as Fiat Currency

    Recently I read some articles about money in the form of currency. Now the concept of value of money has changed. I wish to share some portions from the same as under:

    Today we use the concept of "fiat Currency - that enjoys legal tender status derived from a declaratory fiat or an authoritative order of the government. It is often associated with paper money because, without government fiat or guarantee, bank notes are not a legal tender in payment of debt , and only specie (metal money) has unlimited legal tender for money debts ". After opening-up of economy, India has gone in for managed paper currency standard and currency is not convertible into gold.To protect the public and guarantee the nation against any bankruptcy, the RBI keeps a certain percentage of gold in their own safe deposit vault, in proportion to the additional currency minted and directed into the circulation. The quantum percentage of gold kept in the deposit is not exposed in any documents or in the Websites of RBI or the Government of India.

    "The inherent value of paper money is zero, except when it is measured against the value of consumables the bearer of such worthless paper can exchange for each unit of currency in his or her possession. Additionally; paper money has an intangible value that is directly related to the condition of need of its bearer. While a one hundred rupee currency may be inconsequential to a person with little material need the same may be the governing factor between homelessness, health, and even life for another with lesser means.. In other words, paper money is valued at the maximum amount of consumable for which it can be traded either directly or indirectly."
    (I have taken the information mostly from the answers given by Dr.VSR Subramaniam, Expert in Economics, my thanks to him )


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    Last edited by Brahmanyan; 12-09-2013 at 08:25 PM.

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