The New Nation - Internet Edition

Maswood Alam Khan

Colleagues in my office of late have been wasting a considerable period of time speculating and gossiping about probable percentage of their present basic pays that the government may offer as dearness allowance for their chasing the present galloping prices of daily necessities.

A few, for a dare, expects 25%, but the majority dare not breathe a hope of more than 10%. They seemed not so much frustrated with price hikes as they are bracing themselves against their ongoing hardships in expectation of an imminent comforter, a pay-raise---the way a Muslim while fasting during Ramadan waits out the afternoon in expectation of a delicious 'iftaar' (evening breakfast).

What really perturbed me and at the same time evoked my distant memories on 'money and banking', I learned about 30 years back, was a fancy Halim, my peon-cum-cook, conjured from his pay and perks---a wish of something corporeal, something more tangible than the paper currency notes he draws from his bank account.

Halim said: "Sir, I heard that all Army and Police personnel get food items at heavily subsidized price in addition to their higher pay and perks compared to ours. If the government cannot really afford the same facilities for the rest of the public servants, can't we at least be offered rice grains, instead of paper currencies, as money for our pay and perks?"

Such a fancy by a lowly employee does not augur well for the confidence of people in paper currency notes issued by the government: an ominous signature that brings back to our minds horrid memories of early thirties of the last century when money and prices followed each other upward in an ever-accelerating spiral and people got frantic to get rid of ephemeral paper money in favour of buying anything substantial: a behaviour what in Germany during 1923 hyperinflation was known as 'flight into real values'.

During my long career as a banker I met two categories of clients: savers and borrowers. Whenever I met a saver I used to tell him a bunch of lies on the benefit of savings though my heart bled at his future plights to be inflicted by my bank and whenever I met a borrower, especially one who always sniffed at ways of getting interests accrued on his loan account waived, I had to hear from him a larger bunch of blatant lies though my blood boiled at his mischievous ways of swindling funds out of my bank.

You don't need to be an economist with a doctoral degree on monetary science to understand that in an inflationary economy when your paper money is not redeemable against a predetermined quantity of anything precious like gold or bronze or if your savings is not shielded by any insurance guaranteed against inflation a saver who religiously deposits his money in a bank account is a born loser and a borrower who thrives on bank's money is a born gainer.

Except for a very few genuine entrepreneurs who are usually young and dynamic most of the new applicants for bank loans, as I found, were old, impish, shrewd and conceited persons having no entrepreneurial background. Under tutelage of some muscled guardians one such loan seeker looks for a pliable banker to milk loan from a bank with a view to diverting maximum fund from the bank-financed project. At the very moment of filling out his loan application form he knows he would somehow turn the industry into a sick one in near future and ask for waiver of both principal and interest by the coercive forces of the regime in power he would befriend.

Even if he would have paid interest in full on his borrowed money, say at the rate of 12%, he had in fact to bear the real cost of the borrowed fund at the rate of only 2%, if inflation was 10%. The borrowed fund would be a bonanza fallen from thin air with some extra earnings, if inflation reached 12% or more.

If you are a pauper you may turn out to be a multibillionaire in a matter of ten years in Bangladesh if you know the arts of excellent public relations, hoodwinking a banker into giving loan to your phoney but shiny project backed by a third party collateral and then diverting funds in collusion with some high-ups to invest in some real estate titled under names of your blood relations.

Just wait for only a year or two. Now employ a consultant with proven expertise to prepare a shiny paper seeking cent percent waiver of interest, part waiver of the principal loan and complete blocking of the residual of the principal to be adjusted at easy and multiple instalments on a long time scale.

You are now a CIP (Commercially Important Person) with a shiny bald head, an impeccably manicured moustache and a few creases on your forehead. And people are eager to hear in late night TV talk-shows your wise words on how to arrest price rise and curb inflation.

After ten years the real estate you bought for Taka 20 lakh with fund fleeced from the bank loan will now sell at Taka 6 crore and the instalment of the interest-free blocked principal is now perhaps a small amount, as petite an amount as needed to buy not more than a few bottles of wine---thanks to appreciation of real estate and depreciation of money by the whooping rates of inflation for years fuelled by such scams.

Instead of achieving mass production accompanied by mass consumption providing men with buying power equal to the amount of goods and services offered by a nation's economic machinery to ensure equitable distribution of wealth, a giant suction pump thus draws into a few hands an increasing portion of wealth. This serves them as capital accumulations. But by not generating employments through injecting their ill-gotten accumulated capitals into manufacturing plants or service industries these wealth grabbers stand in the way for an economy to flourish and instead pave the way to all the ills like price hikes and hyperinflation: an end result that has enticed Halim, my peon-cum-cook, to demand money in the form of rice grains.

A weird idea cropped up inside my head after hearing Halim's suggestion on introducing rice grains as units of money. Halim could not help bursting into peals of laughter as I ordered him to carry to a goldsmith in the nearby New Market in Khulna a few pinches of 'miniket' rice he usually buys me for Taka 45 a kilogram.

A very loyal employee Halim without any protest abided by my order and the goldsmith on my telephonic request used his fully automated electronic 'gold balance'---equipped with readability and weighing capacity of a range from 0.01 grams to 4100 grams---to weigh exactly five grams of 'miniket' rice grains Halim carried. Then I asked Halim to count all the grains weighed 5 grams. Result: exactly 331 grains, which translates into 14 grains for Paisa 1 on the price basis of Taka 45 a kilogram of rice.

During my training as a Probationary Officer in Agrani Bank decades back I came to learn that banking as a profession was developed out of a forgery committed by goldsmiths. Goldsmiths were safe-keepers of gold coins and other valuables of citizens, the first bankers who temporarily lent gold coins to the needy for interest without the consent of the depositors---the exact job modern bankers do now by taking deposits from savers and lending a part of the same to the needy, assuming all the depositors would not crowd their shops all at a time to redeem their paper receipts against paper money.

More interestingly, goldsmiths were the first bankers who introduced paper money when goldsmith's warehouse receipts were negotiated by bearers as a surrogate for gold money itself.

Like monkeys and birds humans too were born on this earth with their birthright on shelter and food, the basic physiological requirements according to Maslow's theory on hierarchy of needs. All animals---more or less rational---were happy and hearty with food, drink and abodes galore. Problems arose when we humans declared ourselves as the fittest and started devouring other living beings in quest for our creature comforts necessitating tools and instruments for faster exploitation of natural resources. We humans are the first animals who needed to exchange goods and services.

Before coinage, every person bartered something he needed less for a product he needed more and resultantly a voluntary market economy became a latticework of mutually beneficial exchanges. If an egg dealer wanted to buy a pair of shoes, he had to find a shoemaker who wanted, at that very moment, to buy eggs---a manageable job though at times was proven difficult. But, problems arose when a teacher of mathematics found it difficult to barter lessons on arithmetic to an illiterate grocer for buying groceries or when a home owner could not divide his house into small pieces to barter a splint to a dairyman for buying milk. This crucial element in barter is what economists call the 'double coincidence of wants' and the second problem is one of 'indivisibilities'.

But man is ingenious. He managed to find a way to overcome these obstacles and transcend the limiting system of barter and arrived at one of man's most important, revolutionary and productive inventions: money. Money was a leap forward in the history of civilization and in man's economic progress---though a progress whether in reality emancipated or in fact enslaved humanity is a million dollar question that can be perused and answered only by other animals on this planet or elsewhere in the universe who are still living with complete freedom, with no money in their possessions.

Through the centuries, many commodities have been selected as money on the market. Fish on the Atlantic seacoast of colonial North America, beaver in the old Northwest, and tobacco in the Southern colonies were chosen as money. In other cultures, salt, sugar, cattle, iron hoes, tea, cowrie shells, and many other commodities have been chosen as cash on the market.

Even cigarettes inside prisons and maybe rice grains, as fancied by Halim, and jute were money in ancient Bengal. After trials and errors all countries and all civilizations at last found gold and silver as the best commodities for money from all the points of value, durability, divisibility and portability.

Life was serene and prices were more or less stable depending on demand and supply of purchasable commodities in markets as long as coins made of precious metals were redeemable on demand from the issuer. Inflation was not at all heard of. Problems arose and a hue and cry was raised due to inflation and concomitant price hikes when paper and printing machines were invented and paper money completely replaced gold coins as legal money.

Kings and queens and later all the governments under the sun have been enjoying monopoly control of the supply of money, a control which will perhaps never be denationalized however free economy a democracy espouses, though there is no good reason why a private institution should not produce a more reliable money backed by gold or a basket of commodities. The only factor standing in the way of such honest money is the power of the state, a power that the state is most reluctant to yield.

Kings and governments have used this monopoly position to circulate paper money as a means of control and sometimes as a manipulative instrument to meet mysterious agendas and unavoidable expenses, sparking a new phenomenon known as inflation.

The paper that is issued as money has no intrinsic value beyond the paper upon which it is printed. In the past the paper could be exchanged for prefixed amount of gold or other substantial assets-but monetary monopoly of almost all the governments of the world has stopped that redemption of paper money. No wonder Halim has preferred rice grains to paper as a medium of his money.

Who knows time is not far away when civilization would have to encroach upon all the forests and jungles to build roads, highways and multi-storeyed buildings leaving no space for cultivation of any organic or inorganic food we are now accustomed with! With all precious metals completely exhausted from mines, invention of capsulated synthetic food, surgical modification of our stomachs for consuming minuscule pallets of plastic food and absence of any commodity scarcer and more precious than rice grains produced on limited chunks of government-controlled lands central banks of many governments of the world would probably find monetization of their money on rice grain standard more viable than on gold grain standard.