It is often said that the value of money is down, but we do not have a statistical report on them. The Reserve Bank of India (RBI) as a regulator supervises monetary India different monetary indicators such as 1) GDP / money supply, 2) GDP / Narrow money and 3) GDP / currency with the public to judge, etc. The velocity of money. But even after 75 years of monetary measures, in city centers is not able to tell us the exact number of the declining value of money, because his approach is missing some important factors such as credit growth and interest accrued is not so broad money and narrow. In fact, RBI does not use the concept of gross and net liquidity in order to measure the value of money at a particular time.
The value of all goods and services can be measured in money, but money is not measured by itself. How the money is used to measure and to goods and services produced in an exchange economy it is preferable to assess the value of money as a percentage of gross domestic product (GDP). The value of GDP at market prices proportion of the money supply may be less than the value of the money value of GDP at market prices proportion of the currency with the public shows the highest value of money. It would be confusing for the value of money on another date marked, it is desirable to find the value of real money at a particular time.
Significantly, it is liquid money, which makes economic transactions in an economy. Since the actual cash market is different from the narrow money (M1) and money supply (M3), we need the liquidity effect on the market that can evaluate the sale of the GDP at market prices. So it is better to compare the components of M1 and M3 on the actual liquidity. Only then we would be able to understand what is missing RBI, is the present value assessed.
The narrow money (M1) consists of three factors of a currency union) and the public, b) deposits (excluding deposits) with RBI and c) demand deposits, while the money is (M3) is equal to the narrow money plus time deposits. Since deposits attract liquidity from the market and considers the economic transactions, "said RBI in general narrow money, as total liquidity in the market.
But there are other factors significantly increase liquidity in the market that are not of RBI for the calculation of narrower or wider than money. The first is that the bank's assets as a percentage to reduce the money to 194.41% during 59 years has increased (from 27.07% in the year 1950/51 to 221.48% in 2008-09). Also increased bank loans to GDP at market prices by 46.73% during this period because it was only 5.42% in 1950/51, to 52.15% in 2008/09.
The second factor is the accrued interest on time deposits, which can be used by applicants at regular intervals or after maturity. Many annual interest term deposits as a percentage of narrow money was only 0.98% in 1950/51, which was found, 22.41% in 2008-09. This as a percentage of GDP at market prices increased by 5.08% for 59 years (compared to 0.20% in 1950/51 to 5.28% in 2008-09). Thus, as bank loans and interest added on time deposits to reduce the increases in raw silver, and net cash that go beyond the narrow and broad money supply in the economy.
So, if we really want to evaluate the impact of liquidity on the market, we need to add these two elements in the narrow money. To find the net liquidity of the market, we need to close loans in the bank to add money and get gross liquidity, we still have the accrued interest on demand deposits, cash flow.
The amount of gross and net liquidity reflects the gross and net consumer purchasing power. Therefore, to assess the exact value of the money at once, divide the value of GDP at market prices, the liquidity of gross or net liquidity. The result is the real value of money. After analyzing the available data for the last 59 years (1950/51 to 2008/09), we found that the value of money decreases dramatically if we divide the GDP at market prices, liquidity is gross or net cash, or even Broad Money. This decline moderated, if we divide the GDP at market prices with money Narrow. In contrast to these opinions, if we divide the GDP at market prices using foreign currency with the public, the value of money found to increase. Anyone who accepts this analysis that the value of money during 1950/51 to 2008/09 has increased? Better we should change the value by dividing GDP at market prices, the liquidity of real money that has sharply decreased 2.66 points (3.9 points in 1950/51 to 1.2 examine gross gain points in 2008-09).
If we use this mechanism to assess the monetary value, we can go through the evaluation of the currencies of various countries. Points respective currencies of various countries allows us, May the real exchange rate instead of purchasing power parity, DTS or U.S. dollar as the basis for calculating exchange rates. The value of the currency in various countries by their GDP estimate on its gross liquidity in May to help us, the value of the exact changes in different countries, between countries can be compared to the fixed exchange rates in international currencies. Hopefully, international monetary authorities are beginning to behave rationally and do justice by protecting the values of their currencies and adopt the fair rates for different countries.
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