Reduce inflation, Improve RBI

(1) What is the real cause of inflation?

Answer 1 (A1) –

Inflation in general increases ONLY when rupees (M3) are manufactured in form of loans etc. and given to the rich increasing rupee volume per citizen, increasing rupee supply and decreasing value of rupee and increasing the value of other items such as food, oil etc.

As per RBI figures, rupee volume per citizen (total amount of rupees in the form of cash, deposits, coins divided by the number of citizens) in 1950s was approximately Rs. 65 per citizen and in 2011 it is approximately, Rs. 50,000/- per citizen.

The value of everything is relative and is determined according to demand and supply.

Let us consider this with a example. Say there is a market and nothing else for simplicity sake. In the market, there is a seller selling 10 kilo potatoes and a buyer having Rs.100. Say, in next scenario, the seller has instead of 10 kilo potatoes, 20 kilo potatoes, will the cost of potatoes decrease or increase ?

Easy guess– It will decrease since the supply of potatoes has increased.

In another scenario, say that the seller has 10 kilo potatoes but there are now two buyers with each Rs.100. Now, will the cost of potatoes increase or decrease ?

Easy guess– The cost of potatoes will increase since the supply of rupees has increased and the value of the rupee will decrease and other items costs including food, petrol, gas etc. will increase.

This same thing happens in reality.

(2) Who manufactures rupees and Where did the rupees (rupees = M3 is defined as sum of all notes, coins and Fixed deposits) come from ?

 Answer 2 (A2) –

The Reserve bank has licence to manufacture it and also Scheduled Banks (Banks licensed by Reserve Bank to manufacture rupees in form of F.Ds). There is no Gold standard which was abolished since decades, the RBI-gov on instruction of the government manufactures them.

Only RBI can print notes and mint coins but scheduled banks like SBI, ICICI etc., can also manufacture rupees (M3) in the form of F.Ds.

This increase in supply of rupees decreases the value of rupees and increases the costs of other items including food, oil prices and causes general inflation.

(3) Why does the RBI and scheduled banks manufacture rupees ?

Answer 3 (A3) –

They do so for the rich. Let me give you a example. Say there is a rich company, which has connections with the RBI governor, finance minister etc. They take loan of Rs. 1000 crore from a government bank and pay back Rs. 200 crore. And since they have connections, they will tell the RBI-gov, FM, etc that they will give them cuts/bribes in return for allowing to declare their company bankrupt.

So the company is declared bankrupt. Now, if the bank declares this loss of Rs. 800 crore, then the bank will also become bankrupt and the bank customers also will loose their deposited money and the customers who are common citizen-voters will raise hue and cry and the government will have to face wrath of public. To avoid this, the government asks the RBI-governor/scheduled banks to manufacture Rs. 800 crore rupees. This excess of supply when comes into the market will decrease the value of rupee and increase the cost of the goods.

(4) What is the solution for stopping this? We need to remove the government and make good policies.

A4 –

This illegal rupee manufacturing for the rich has been happening during Congress and also BJP governments` rule. So, removing the government and installing other government will not solve the problem.

Following are the solutions-

  1. a) Right to recall Reserve Bank Governor and RTR-FM- Presently, the RBI governor illegally manufactures rupees for the rich on instructions of the government. Once the posts of RBI governor and FM are DIRECTLY accountable to the masses, they will not do so. Please see the procedure of RTR-RBI governor in chapter 9 of
  2. b) The RBI governor should be able to manufacture rupees ONLY with the approval of 51% of the citizens of India. For this, we need Transparent Complaint/Proposal procedure (see chapter 1 of

Please also see chapter 23 of and for details of `Real Cause of Inflation`