There is nothing which is as funny as money. Money behaves in a funny way. Without it, the day-to-day life can't be run. It is required to pay fares, do shopping, buy necessities of life, go for amusement and carry on business. It is required for savings and investment. Money is required for exports and imports. It is needed for socio-economic development of the country.
Dr Lutfur Rahman, a famous writer of Bengali literature, had once written that money was the source of all evils. Musclemen are hired in political arena with money. They can hit others, kill opponents, vandalise public meetings and capture election centres. Extravagance, meaning abundant money which is more than what is needed, can lead to many unethical activities. It is said sometimes that wealth runs after wine and women. So money is necessary on one hand and it is an evil on the other.
It is again money (currency) that prompts the representatives of the leading countries to hold conferences in order to govern the monetary relations among independent states. Such a global conference was held in the Mount Washington Hotel in Bretton Woods, Newhampshire, USA in July, 1944. The system agreed upon on what is known as the Bretton Woods system. It was a fully negotiated monetary order. The Bretton Woods made it an obligation for every country to adopt a monetary policy which would maintain the exchange rate by tying its currency to gold. The intention was also to address the competitive devaluation of the currencies. It emphasised on cooperation among countries.
Many funny things again occurred around the Bretton Woods system. The US was reported to control two-thirds of the world's gold. So it insisted that the Bretton Woods system rest on both gold and the US dollar. The Soviet Union's representatives attended the Bretton Woods conference. Later, Moscow declined to ratify the final agreement. It charged that the institutions the Bretton Woods system created were branches of the Wall Street. The real blow to the Bretton Woods system came on August 15, 1971. On that day, the US unilaterally terminated convertibility of the US dollar to gold and rendered it a flat currency. This action was termed as 'Nixon Shock' in economic literature. It has virtually created a situation in which the US dollar became a reserve currency. Many countries including Bangladesh have been using US dollar as reserve currency. It was also found funny that many fixed currencies, such as the pound sterling, also became freely floating.
The two international institutions created under the Bretton Woods system, however, have been wielding immense influence over the world, particularly the developing countries. These are the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD). The latter came to be known as the World Bank. Their roles have been treated with a mixture of success and failure and often criticised in the academic world. Still developing countries are used to look to them in times of crises and for aid. Recently, Brazil, Russia, India and China have floated a bank known as BRIC Bank which is being treated as an alternative to the World Bank. The world will have to wait and see how far this new initiative can perform the purpose of the initiators and the developing world.
The funny behaviour of money invested in financial markets and other sectors of the economy is also observed. The financial debacle in South-East Asia in 1998-99, the US financial crisis and immediate past financial crises in some European countries bear testimony to it.
Now the monetary policy is related to money. There are different kinds of monetary policy-expansionary, contractionary and prudent. When monetary policy is expansionary, it fuels inflation, price spiral in lands and stocks and sometimes exerts pressure on the exchange rate. The contraction policy is found to be reverse. The claim of the Bangladesh Bank, the central bank of the country, is that it has been pursuing a prudent monetary policy. The present situation in Bangladesh is such that nominal interest rates are coming down, inflation rates have not increased officially, the demand for credit is sluggish and investment in the economy is not taking place. One may argue that the sluggish demand for credit and the poor rate of investment can not be attributed to the monetary policy of Bangladesh being influenced by the government. Sluggish demand for credit and lack of investment in the economy can be attributed to political uncertainties prevailing in Bangladesh. True, political unrest is going on and it will not stop unless there is a political settlement. The calculation of inflation rates does not appear to be correct. Prices of essentials are soaring. Those who go to markets experience it everyday. It implies that the consumer price index has gone high. The monetary policy can not address these issues in the real-life situation.
Recent disclosure by the finance minister of Bangladesh that Tk 5 would be the lowest denomination of coin instead of the existing Tk 2 and Tk 1 was really funny although he later made a U-turn in his remark. The reason, as explained, was that because of the decline in value of Tk 2 and Tk 1, their share in the total money supply has fallen and so there is no necessity of keeping those in circulation. The funniest was his remark that once 10 per cent of Tk 1 and Tk 2 notes/coins is withdrawn from circulation, Tk 5 notes/coins would be issued against them. How funny it was! How one would have paid Tk 3, Tk 4, Tk 13, Tk 18 and so on? How one would have paid bus fares for short distance, bought a match box or got a cup of tea in an ordinary restaurants? At long last, the money remains where it has been, making his statement funny.
Money's definition is clear. 'Money is a matter of functions four: a medium, a measure, a unit and a store. As long as any note of any denomination is used for any of these four functions, one can not ignore that note." The harsh reality is that mankind will have to live with money however funny it is.
The writer is an economist and columnist.
chowdhuryjafar@ymail.com
The funny money
Jafar Ahmed Chowdhury | Published: January 23, 2015 00:00:00 | Updated: November 30, 2026 06:01:00
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