(SPAM) Gold Reserves – HOW THE CURRENCY VALUE CHANGES?

A post is circulating on social media which talks about Gold Reserves and says that a government should invariably need GOLD to run the country for their day to day business… This is false news. Please find more details at the verification section of this article.

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Below post has been circulating on social media

HOW THE CURRENCY VALUE CHANGES?

WHY PAY TAXES and WHY GOVERMENTS NEED TAXES!?!

Please go through the below simple Economics, which will give a good idea on why Taxes are more important not only for Government but also how beneficial to its citizens, indirectly!

A Government should invariably need GOLD to run the country for their day to day business! Since the Gold cannot be pumped into market, it chose to use the Notes/Currency instead!

And printing the notes/currency is done under the watchful eye of the IMF ( International Monitory Fund). A Govt. cannot print notes left & right! It has to be approved by IMF, however it can print any denomination of notes but it should be equivalent to the total weight of the Gold, the Government owns.

Let us compare two countries! I have taken America and India because we always compare our country with America!

For calculation purpose let us assume that , Government of America holds 1 Ton of Gold and Government India holds same 1 Ton of Gold

And now:

America printed $ 1 dollar notes of 1000 nos which is worth $1000. So, 1 gram of gold is equivalent to 1 Dollar (1000 grams=1000 notes)

India Printed ₹ 1 notes of 1000 nos which is worth ₹ 1000. So here 1 gram of gold is equivalent to 1 Rupee ( 1000 grams=1000 notes)
Now the value of Dollar and Rupee are same, i.e. $1 equivalent to Rs.1

Now, American government releases $1000 notes into the market and sets 20% as tax for each transaction. And it receives back $ 200 in the form of taxes. Now, the American Government, with that $200, buy more 200 grams of Gold with that money and release another $200 worth of notes in the market. So now the American Government hold 1 Ton and 200 Gms of Gold and American Market has $1200 worth of notes. And still 1 Gram of Gold is $1. And this will keep on going and the 1 Gram of Gold is $1 always as long as Government receives 100 % tax amount in return as it buys gold for the worth of tax received and printing more notes equivalent to the gold and releasing in the market!!

Now in India, the Indian Government too releases ₹ 1000 in the market and sets 20% as tax. But it only receive back ₹ 50 in the form of taxes!! Which means only ₹ 250 of the released amount were transacted officially! Because balance of tax for ₹ 750 is till rotating in the hands of unwanted elements in the market, who does not want to pay tax! This amount is “unaccounted money” which is called ‘black money’. Though this ₹ 750 still in the market, it is not accounted in the books of government officially. So, the money in the market is only Rs. 250 as per government records! Whereas ₹ 750 is also being used in the market! This is called parallel economy!! At the same time the government now can only buy 50 Gms of gold from the tax amount it received. So the Govt buys that 50 Gms gold and release ₹ 50 worth of notes into the market. Now the money in market is ₹ 300 (₹ 250 + ₹ 50) only officially, whereas it is supposed to be ₹ 1050. At the same time the Govt. has to meet the demand for more notes, because those ₹ 750 has gone into unaccounted! So the government then decided to print more ₹ 750 notes and to release them in the market. Here comes the IMF which does NOT allow this !! It asks the government to reduce the value of the rupee because the government is ‘pumping’ more notes against the same weight of Gold it holds, that is 1 ton 50 Gms! Government has no choice (because it did not receive 100% tax return for the amount it released and it could not buy more gold) and hence reduces the value of Rupee and pumps ₹ 750 more notes into the market. So the market has now ₹ 1800 whereas Govt still only hold 1 ton 50 grams!!

So now the value of ₹ 1 has gone down to ₹ 1.71!!

So when compare to US Dollar as above, which was $1 to Rs.1, it is now $1 to ₹ 1.71 !!!

The notes are pumped into the market regularly to meet the demand of the market and the value of the Rupee is depreciated every time when Gold reserves are same. That the reason why the Rupee is 67.80 to a Dollar today!!

Had the Indian Government receives 100% tax in return, the value of Rupee would have NOT gone down drastically!!

Now, can you all understand why the Governments need taxes?! And how, we citizens are benefited? If Rupee is strong and stable then the value of our properties/assets will be strong too!

That is the reason why the America is the richest country as 95% of citizens ( at various brackets) are paying their taxes!! Whereas in India?? Can anybody guess?! No marks for right guessing! Just type in google “percentage of taxpayers in India” and you would know!! I am sure your head will go down with shame!!

Come on…did you all check that figure in google?!?! Don’t we feel shame on this figure!!? We talk of so many things, demands benefits and badly compare us with those Western Countries for all that infrastructure, system, cleanliness, ever lighting cities with no power cuts etc..etc!! We praise them! We appreciate them! Whereas nobody, I repeat nobody, compare and raise voices on how much are we contributing to our own country as part of tax!!!

This article is not supporting Modi OR whosever talk against demonetization! This Article is to bring about and to educate on how the Black Money damages and ruins the Country!!

I know you will send this article to your friends and families but I request you to circulate to ALL of your enemies too!!

Verification:

Ok, lets debunk the details one by one.

First the Gold Standard.

Quoting from the source (HowStuffWorks):

One of the long-standing myths about modern currency is that it is backed by the U.S. gold supply in Fort Knox. That is, you can trade your greenback dollars to the U.S. government for the equivalent amount of gold bullion at any time.

At one point, this was true of most paper currencies in the world. However, the U.S. took away the government backing of the dollar with an actual gold supply (known as leaving the gold standard) in 1971, and every major international currency has followed suit.

The obvious question is, “Without gold, what does guarantee the value of our money?” The answer is: nothing at all. (Read more at: http://money.howstuffworks.com/currency7.htm)

Printing Money – Can a Country print Money and get Rich?

What determines the amount of money a country can print?

There is no fixed yard stick which determines the amount of printed money by central bank. It should be sufficient to make transfer of goods and services smooth and at the same time restore the value of currency.

Value of currency depends on many factors e.g. net exports, Current and fiscal deficit, Interest rate in the economy among many moving parameters. (Read more at: https://www.wisdomtimes.com/blog/printing-money-can-a-country-print-money-and-get-rich)

Also some good read about inflation, hyper inflation
http://www.economicshelp.org/blog/634/economics/the-problem-with-printing-money

A few questions and discussions on them at the links below.

Why can’t RBI Control the Rupee value against Dollar by simply printing lesser money
https://www.quora.com/Why-cant-RBI-control-the-Rupee-value-against-Dollar-by-simply-printing-lesser-money/answer/Akshat-Agarwal-11

How is Money printed in India
https://www.quora.com/How-is-money-printed-in-India/answer/Tej-Abhilash-Ancha

Special thanks to Mr. Prashanth K S who volunteered to help us debunk this post.

Post Date: 16 Jan 2017

Post ID: #2108

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