It is all fake!

Have you heard of an organization making 15,000 Crore profit with a capital base of 5 Crores?

If not welcome to the world of deceit.

The immediate question that must have come to your mind is how can a company make 15,000 Crore profit with just an investment of 5 Crores? Well, if the company is RBI (Reserve Bank of India), it surely can.

Any commercial organization produces goods and services and then sells them to the buyers in the open market. In this case RBI produces bank notes in its security presses at a cost of 4.5 Rupees for every 1000 rupee note and then gives this note to the banking system.

The banking system in turn lends this money to people like you and me and charges interest on such lending. It in turn pays the RBI for the money it has borrowed. Thus RBI is able to generate profit all most out of thin air.

What are the consequences of such operations? Well anytime the banking system requires more money to lend, RBI prints some more. This is very much in line with international practices. Even the Federal Reserve has been doing this and its chairman Ben Bernanke is called Helicopter Ben for dropping tons of currency where ever he sees a troubled bank or financial institution.

In terms of plain economics, when the supply of money increases in the system, there will be more money chasing less products and services. Prices will rise till an equilibrium is reached. Therefore the real cause of inflation is not rise in oil prices but rise in money supply in the system.

Which brings me to the headline. When you produce something out of thin air, without any asset to back it up, the currency can at best be termed fake!