May 3rd, 2012
Email this page

A Review of Money Kumar

The RBI has misled us in this booklet by saying we need to make motorbikes and video games. Actually we need to make food and housing materials. Also, the RBI was wrong to say that we need growth and that there necessarily has to be high interest on borrowed money.

the criticism of RBIBy Anandi Sharan*

THE RESERVE Bank of India (RBI) published a teaching tool in which the RBI personified as Money Kumar, guides children through monetary policy. This short teaching guide is useful for teachers provided the children are given additional information. It is available here:

The first issue which teachers should address comes up when the children hit the problem of inflation. The guide says: “he [the RBI] pushes up interest rates”. Only secondly does he “adjust the other slider so that the excess money gets sucked back into his machine”. The teaching aid concludes “unlimited money is unlimited trouble”.

Here it will be useful to explain that the conclusion “unlimited money is unlimited trouble” is only one side of the coin. The other side is what the children saw: limited money is limited trouble, and money supply management by “sucking money back into his machine” is a very effective instrument for limiting money supply and controlling inflation provided Money Kumar himself created the money in the first place.

In other words, if the RBI genuinely spends its own money into circulation like the children want, Money Kumar can also take the right amount of money out of circulation again to maintain price stability, and he does not need to rely on “pushing up interest rates.”

This then leads on to the second discussion point.

Why do we need high interest rates?

This is discussed in the next part of the teaching material as we move on to the issue of growth. Money Kumar says: “by ensuring price stability I ensure that the nation’s growth has steady momentum.” In their virtual world, the children experiment with all- out growth. Soon enough “resources reach a limit, production cannot go up anymore, higher demand has caused inflation… the economy enters a period of recession, the situation is out of control.”

The solution Money Kumar proposes to limitless growth is controlled savings by savers and controlled lending by banks. “He presses a button called CAPITAL and money flows from the RBI to the banks.” He then tells the banks how to lend it prudently, creates a big umbrella called deposit insurance, and creates confidence in the banking system to attract depositors.

The teaching aid ends with “Great! So what’s next?”

After reading through the teaching aid in this manner, it will be useful to discuss the question of growth in a bit more detail. At the outset teachers can mention that the idea of borrowing money and having to pay interest is ideology. Most people know instinctively that if you borrow money from someone you should just be able to give it back when you have it. Most people know that charging someone interest is usurious.

Secondly it is important to discuss our insight from the beginning of the teaching aid again. The teacher can repeat that the money system would be just fine if Money Kumar printed his CAPITAL – the Rupee coins and notes – and just paid the money into the system, say to us, and took it out of circulation again if there was too much.

The teacher needs to ask clearly: Then why do we have to have production growth? This leads to the question, what do we need all this money for?  The teacher should discuss the important point raised in the teaching aid about “resources reach a limit.”

When I use this material, I explain that lending money to hydrocarbon and nuclear companies to manufacture motorbikes causes climate change. But without these energy sources companies have hardly any ideas about what they should produce.

I tell the children that in the USA for example interest rates are zero, anyone can borrow money at zero interest rates, but still people are not borrowing because they do not know what to do because of climate change. This is what has caused the global economic crisis.

In the past, profits came from various sources, but mainly from directly or indirectly using machines running on coal, oil and gas and nuclear energy to get minerals and other non-renewable resource out of the ground and make industrial products like cars and motorbikes. Only if you have iron and steel can you make a bike. But if you must stop polluting and if you must stop using these energy sources, then what shall you produce instead?

So the question is, in the age of climate change, what do we need to produce?

I ask the children again: why do you want to borrow? What do you need money for? What if you had a regular wage from your gram Sabha or town ward committee, would you still need to borrow?  What would you do with your regular wage if you got it from your local gram Sabha every month?

We discuss that we need food, housing, education, health, clothing, water source.

I ask again what we mean by growth.

I explain that we only have to have growth in food production and housing and more schools and more and more hospitals and more and more money itself because we have population growth. So if all couples only had one child, there would be no need to produce more food and more houses this year than we produced last year.

Also, now that we are not allowed to use hydrocarbons and nuclear energy, the main source of energy on earth is the work of the people and the sunshine that makes things grow.

The RBI has misled us in this booklet by saying we need to make motorbikes and video games. Actually we need to make food and housing materials. Also, the RBI was wrong to say that we need growth and that there necessarily has to be high interest on borrowed money.

So we agree that we only need growth so long as there is population growth, and we need a different kind of growth, we need growth only in food production and housing and basic necessities, and in soil fertility and so on, to keep up with growing population. And we need de-growth of population and de-growth of pollution so that we can manage to feed everyone in our crowded country and maintain healthy soils.

I usually end the session by explaining that the RBI was created by the British before independence, and that today we must get rid of some of the wrong policies they forced on us, especially the idea that we should borrow money and pay interest and that only enterprises and banks get money from the RBI. We agree that all adults should get a wage every month so that they can plant crops, build houses and maintain the water sources and the forests.

So the session ends with a look at the last slide of the teaching aid. “Great. So what’s next?

We agree that the RBI should be in charge of money in a positive manner, and that all adults over 16 should get a wage from their Gram Sabha and town ward committee.

We agree that if we want to jointly borrow money from a bank where we have deposited our wage, we should use it for farming, building houses, caring for children, education, health, and other social, environmental and cultural work which does not need hydrocarbon or nuclear energy to do. We agree there is no need for interest on money borrowed. In fact we can agree that as we will all be getting a wage we can jointly just spend our wage on production and may not even need to borrow.

We agree that the only growth we need is growth in food production and that we must have a 1 child per family policy. We agree that money growth today is an ideology, but that we need money growth whilst we have population growth, but that if there is too much money the RBI should take it out of circulation. In fact we think we are quite capable of taking it out of circulation ourselves.

We agree that we need a law to outlaw hydrocarbons and nuclear energy so that any group of people only borrows money for things that are not harmful to the soil and the atmosphere.

Finally we agree to a 6 point programme which we want to discuss further:

6 point programme:

We       should have only positive money – so we should abolish fractional reserve banking

We       should have a universal wage

We       should outlaw hydrocarbons and nuclear energy

We       should abolish private and state property so that everyone follows the rule about only producing things that are not harmful to the soil or the atmosphere and so that we can jointly work to restore the fertility of the soil so that we can produce enough food and houses; and

We       should probably protect the borders of the country so that companies from countries where they do not yet have these rules cannot spoil our country and undermine our new rules; we should give the power over land and money to village and town ward committees and local banks for adult consensus decision-making. This is so that we do not always have to wait for the RBI or Delhi to decide everything. We can have our own banks and committees taking money out of circulation if there is too much.

*Anandi Sharan is an educator and campaigner on climate change and political ecology. She lives in Kempapura Road, Hebbal, Bangalore and has 2 children age 22 and 24.








Press ctrl+g to toggle between English and Malayalam.