Don’t judge me just because I think root of all evil are men; no, not mankind, but men (the one with you-know-what and without you-know-what). Anyway, so while idly browsing through my Facebook page, I came across an interesting note with a title ‘Things you don’t know about Pakistan’. I clicked it open to come across some gory but predictable details about Pakistan.
What got my attention, and was listed on top as well, was the root cause of inflation that has been jumping our economy’s backbone the wrong way. It said that we print Rs.300 crore, EVERY DAY! 7 days a week and 365 days a year, a developing economy like ours mints useless paper and calls it money.
For all those who aren’t well versed in boring concepts of economics, let me simplify the message for you. You live in a community of 10 people. You are the only 10 people on planet. 3 of you produce milk, 3 produce eggs and 4 bake bread. You all have enough money (paper currency) to purchase the produced goods. Let’s say, your cumulative monetary wealth is equal to Rs.100.
Now, an alien drops by from a nearby planet and gives two people on your planet Rs.500 each. And leaves. Remember, that the resources you had to produce goods remains unchanged but the monetary wealth increase to Rs.1100. Two people have Rs.500 so they would want to buy more of the available goods. To do so, they will be ready to pay more, and the seller (who wants to make maximum profit) will sell his goods to the one offering the most. Thus, prices are pushed upwards without any increase in value, real or otherwise.
The same is happening in our part of the world. We are printing money without increasing our production capacity or exploiting natural resources available to us. This leads to an unnecessary hike in prices of goods and services available to us, depreciation of our currency, investment and savings, and an overall economic downturn.
An info-graphic at from Coyote gives you a quick lesson on inflation; a recommended read.
Now, lets see what excessive money, therefore inflation, does to your income, savings and investments:
(it is recommended that you zoom in 200% for a better view; or better, visit the original location by clicking here)
May God bless us! *sigh)