Posted by: Duncan Chowdhury | July 12, 2008

Bad Money Drives Good Money Away From The Market

Today, I happened to travel by rickshaw and the fare was fixed at Taka 15. When I reached the destination, I handed over a note of Taka 20 to the driver, and he was giving me the change. I had noticed that the rickshaw driver, was choosing the Two Taka notes, which were torn and handed over to me two of such notes along with the a One Taka coin. I noticed that he had good notes also with him.

I murmured the old theory in economics, which I learnt in my high school days. “Bad money drives away good money from the market.” This is how, people retain good notes to themselves and give away the bad money for circulation. I can confidently say that I too is not an exception of this, I also do the same thing, may be unconsciously, retaining the good notes with me and giving away torn or old currency notes to the shopkeepers while shopping.

Not to mention that there is also another habit regarding coins which we had learnt from our childhood. The piggy bank habit. During our childhood, it was quite customary for our dads to buy us clay banks, what we call matir ghot. We used to save our tiffin money there on regular basis and when it was filled up, we broke the matir ghot and got an amount of money like a windfall. We used only to keep twentyfive and fifty paisa coins on those days.

Now my second grader daughter, too, has adopted that paternal habit. Where ever she finds any coins she puts it in her matir ghot, but now a days the denominations are higher, no more poisa coins, these are One Taka, Two Taka and Five Taka coins. Her matir ghot is nearly full and now she cannot lift it also for its weight.

I am sure that this practice is also done in thousands of homes in our Bengalee families and surely this creates shortages of coin circulation in the market and we are to be blamed for this.

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