Friday, September 26, 2008

Religion and Economy....' Money is just a Medium of Exchange'

No I haven't turned socialist and neither has the feeling of greed for more money died down within me....The article is just about an interpretation of what I observed on my trip from Hardwar to Gaumukh. 

Here I enter into Hardwar and I observe the market economy at work to the fullest.....The product of the region..'Religion'....It's a city whose economy drives itself solely on the basis of religion...At every step you can find temple and dharmsalas each selling some USB to attract bakhts (customers), as you step into the ghats for watching the aarti you are appaled by the its untidiness and don't want to sit on the dirty floor (looks like the we had to do the long wait and watch the whole aarti standing) but wait the market economy comes to your rescue....you find children selling paper sheets to put under your b**ts.....and as you settle in would come hoards of people selling you Diyas, milk and flowers to offer to the holy Ganges, so even if you never wanted to take it but when you find other people buying it you are tantalised to do the same...(the usual herd beaviour in the markets thus creating a market for a product out of nowhere)....

Next let's  cut short to Gangotri....almost 300 km from Hardwar....the need for money seems to have subsided here though not completely gone...at 3200 metres above sea level the food is a little expensive and you still need to tip the waiters...though the needs here are limited and so is the need for money...that brings me to the first major point in the article:

1) The need for money is driven by the increase in need and luxury..... Half a century ago a monthly salary of 500 rupees was thought to be good!!! simply because the articles costed much less as there was lesser cash in the world and there were not many funky gadzets. The worlds money supply grows at around 20% annually!!! and at this rate the amount of money the world would have had now would have grown by over 8000 times!!!, however even if someone's assets might have grown at this pace he would still have been the same of as he was some 50 years ago when it comes to luxury articles (articles not essential for survival and basic living) so if you want to become richer make sure that first of all you have a good asset base to start with which then grows at a rate faster than the money supply of the world and add to it the rate of growth of your needs (no idea how you can quantify it though!!!)......

Coming back to the story on the top of Gaumukh glacier with nothing around us but simply ice...money looses its value completely, well not really...we just realize that money practically had no value to start with...it was and is just a medium of exchange and derived it's value mainly from because it can buy you the needs by being the easiest medium of exchange but here at 4250 metres above sea level this medium of exchange doesn't work...One of our fellow trekkers tried to offer some of this medium of exchange to a sadhvi on her way to Tapovan...she just laughed and went passed..probably she was clever to know this at the first place.........

Now back in Delhi...the value of money is back...(Thank GOD!!!)...probably that was a different planet but the lesson I learnt there can be encapsulated in one line:

"Money helps in making the market efficient however its value is derived from the inherent inefficiency in the market"......

In other words just because money is the most convenient medium of exchange it has a value, so its critical that for wealth creation only a small portion of your portfolio is in the form of cash the rest should always be invested in some asset or the other.........

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