[BES171] Money: Evolution, Function, Types: Limited vs Unlimited Legal Tender, Fiat vs Fiduciary, Token vs Full Bodies, Debasement vs Demonetization, SBN Ordinance & More

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India Yearbook
  1. BES171/Money#1: Functions of Money, Full Bodied coins vs Token Coins, Debasement
  2. BES171/Money#2: Limited & Unlimited Legal Tenders, Fiat & Fiduciary Money, Gold & Paper standard, Polity angle of Demonetization
  3. BES171/Money#3: Bitcoin Simplified, Blockchain technology how useful in Banking transactions?

BES171/Money#1: Functions of Money, Full Bodied coins vs Token Coins, Debasement

  • In the previous episode, we learned about the importance of economic survey in UPSC exam, and the gist of its 14 chapter. Now moving to the first pillar of economy i.e. “Money, Banking, Finance and Insurance.”
  • While “money and its evolution upto bitcoin” has been covered in previous lectures (“L3”) and articles but take a look at them again in the light of new developments especially regarding the meaning of legal tender, challenges to digital payment and utility of block chain technology.
  • Even before the invention of money, people used to trade with each other using barter system however this system, while it has some advantages, suffered from the problem of “double coincidence of wants”, problems related to the divisibility and fungibility of value, did not permit industrialisation or division of labour or redistribution of national income.
  • Therefore money was invented, with two primary functions 1) measure of valu. And 2) medium of exchange And three derivative functions: store of value, transfer of value and deferred payment.
  • Over the period of time, this money evolved in five stages : 1) Commodity Money 2) Metallic Money 3) Paper Money & legal tender 4)Bank Money 5) Crypto Currency.
  • First we take a look at Commodity money: examples, advantages, limitations and How the problem of uniformity and purity of gold nuggets leads to invention of metallic coin money.
  • Metallic Money: what is the difference between full bodied coin and token coin. What is Grisham’s law and debasement? How do they affect the value of coin?

Functions of Money, Full Bodied coins vs Token Coins, debasement
Youtube Link: http://youtu.be/8a_VfEkvoqY

BES171/Money#2: Limited & Unlimited Legal Tenders, Fiat & Fiduciary Money, Gold & Paper standard, Polity angle of Demonetization

  • So far we learned about the first two stages of money’s evolution i.e. commodity money and metallic money. But metallic money was bulky to transport, so people started using bill of exchange and paper-currency as a substitutes for full bodied coins. This gave birth to two types of fiduciary money i.e. 1) legal tenders and 2) non-legal tenders.
  • Legal tenders can’t be refused but there are caveats, accordingly they’re subdivided into two parts 1) limited legal tenders such as coins which can’t be used beyond a level for debt-settlement; and 2) unlimited legal tenders e.g. currency. While in theory Indian  currency is unlimited legal tender but government can put reasonable restriction on it. e.g. in the latest budget 2017, the Finance Bill section 269ST prohibits cash transaction of rupee 3 lakh and above.
  • When fiat money is backed by gold or silver standard, it’s called “representative money”, and when central bank promises “to pay bearer the sum of this many rupees”, currency becomes an “anonymous bearer bond with zero interest”.
  • Over the years, India has followed three currency standards 1) fixed exchange rate 2) minimum foreign reserve system 3) managed paper currency standard.
  • In India, two entities issue fiat money 1) Government of India under the coinage act 1909 they issued all coins and Rs.1 note; while 2) RBI Act 1934 empowers RBI to issue the remaining bank notes and RBI central board is empowered to make recommendation to government of India to withdraw any notes from circulation. This is called “Demonetization” and was done thrice in India after independence.
  • After the demonetization of Rs.500 and Rs.1000 notes on 8/11/2016, Government of India issued Specified Bank Notes (Cessation of Liabilities) Ordinance, 2016 to curtail the liability of RBI regarding note exchange and at the same time make it punishable to hold old currency notes  beyond a limit of 10-25. In the Budget 2017, same ordinance was put tabeled as a bill.
  • The controversy regarding fake Rs.10 coins.
  • What is bank money, how is it generated, what are its advantages?

Limited & Unlimited Legal Tenders, Fiat & Fiduciary Money, Gold & Paper standard
Youtube Link: http://youtu.be/IvER8wCJ8uI

BES171/Money#3: Bitcoin Simplified, Blockchain technology how useful in Banking transactions?

  • Bitcoin is in news again because of its Blockchain technology, which is now used by ICICI, Yes Banks and others for maintaining ledgers.
  • What is Bitcoin? Why it was issued? How does it work? How is it used in illegal activities? What is bitcoin mining and hashrate?
  • What are the applications of bitcoin’s blockchain technology for financial transactions?
  • What is the stand of RBI and Ratan Watal committtee on the blockchain technology?

Bitcoin Simplified, Blockchain technology how useful in Banking transactions
Youtube Link: http://youtu.be/INxNZK8MwJ8

Next lecture: Since demonetization the focus has been on promoting the usage of bank money and digital payments; therefore, next time we’ll dwell further into theory and current affairs on these issues, including recommendations of Ratan Watal and Chandrababu Naidu Committees, and Economic Survey for promotion of digital payment, and the recommendation have been implemented in Budget-2017 to reduce cash-transaction.
Powerpoint available Mediafire folder there you goto “1_Economy_Mrunal” -> “BES17 ” and you’ll find the powerpoints for this lecture series.

Mrunal recommends

  1. (free) NCERT, NIOS, TN-Books
  2. Environment by ShankarIAS
  3. Indian Polity M.Laxmikanth (Hindi | English)
  4. Art & Culture by Nitin Singhania (Hindi | English)
  5. Spectrum: Modern History (Hindi | English)
  6. Bipin Chandra: Post Independence
  7. Fast-track to Arithmetic Rajesh Verma
  8. MK Pandey’s Analytical Reasoning
  9. Disha’s Topicwise Paperset (Hindi | English)
  10. School Atlas
  11. Mains: Language papers
  1. (free) NCERT, NIOS, TN-Books 4 History,Geo,Sci
  2. Indian Polity M.Laxmikanth (Hindi | English)
  3. Spectrum: Modern History (Hindi | English)
  4. Maths: Quantam CAT Sarvesh Kumar
  5. Objective General English SP Bakshi
  6. Word Power made Easy -Norman Lowe
  7. Topic wise Solved Paperset by Disha


So far 29 Comments posted

  1. GHANSHYAM

    Sir thanks a lot. Panacia for economics. Hoping this time series will be more lethal for upsc

  2. Pushpinder sharma

    Sir thank you for the new series. Hope this series will become the one and only source of upsc economy preparation.

  3. Pushpinder sharma

    Sir, what would be the estimated time of completion of the series ? Will it be completed before CSE PRE – 2017 ? plz inform so that we can plan whether to prepare from the old series or rely totally on the new series.

  4. kalyugbuddha

    Thank you sir from the core of my heart…hoping positively to clear prelims+mains+interview this time and appear in the final merit list as now its the FIFTH ATTEMPT!!!

  5. Ashish Mishra

    Thanks a lot sir.you really deserve Bharat Ratna.

  6. Aditya Dhanraj Verma

    Sir thanks a lot. Please upload all ppt in download section.

  7. Akash

    Thank You for these videos, SIr.

  8. conflict management

    finali……………..mrunal sir reloaded

  9. mohit

    Waste of time….Not useful

    1. Milind

      Then suggest me what will be useful, bro?

  10. sd

    thanks a lot mrunal bhai ..you are an inspiration..

  11. Tirup Parmar

    Thank you so much, sir, for all ur efforts…New series is really awesome.Thanx a lot sir…:)

  12. SKM

    Awesome sir…….
    Eagerly waiting for the next session
    God bless you……

  13. Ashvini Bhashkar Chatare

    last Year survey lectures dekhne chahiye???ya aap isi sal sab cover karenge???sir pls do answer..
    one more query is that How to balance the past 2 years survey with the recent year???

  14. Dipak

    Thanks a lot Mrunal Sir….😄👍
    Keep it up…

    New Survey Structure…New Series of Your Lectures….overall awesome….

  15. M.patel

    sir please upload one lecture on india 2017 how to read ??

  16. Rocky

    Sir, can we get PPT of this lecture..?? I am not getting from where to download.. Plzz help

  17. Dineshri

    Sir,
    Art and culture and Science and Tech.is not included into the syllabus of Preliminary exam 2017
    Is it should be prepared for the same?
    Please guide

    1. Milind

      I think A&C is included with Indian History and S&T with General Science… But not clear about it. Can you pls tell me whether A&C and S&T were mentioned separately in last year notification???

  18. Swadesh

    I missed the prelims 2016 by few marks. I regret that i have not watched the mrunal economic videos. Many questions like bitcoin, payment banks,pradhan mantri fasal bima yojana etc which were asked in 2016 were covered by him . I made silly mistakes in these questions . Even question in mains like on smart city was covered by him . I do not have a habit of unnecessary praising others but if you are confused and find economics difficult , go for Mr. Mrunal. I have already completed Budget and Economic Survey but still i will watch his videos . Thanks Sir.

  19. Adarsh

    Sir, by when will you complete the entire series? We are eagerly waiting. Please let us know as we can plan our preparation accordingly.

  20. bhatia

    Sir, I have a doubt. You posted a question in Money#1 – Assertion-Reasoning Question regarding high cost of transaction in barter system. You said that lack of division of labour is not a reason for the high cost of transaction in barter system. Why is it so?

    My logic says that as there is no division of labour in barter system, and no specialisation, thus transaction cost is higher as there is no double coincidence of wants.

    Eg I have tomatoes that I want to sell to buy corn, but most of the other people have also grown tomatoes and thus – this lack of specialisation – gives birth to lack of double coincidence of wants – and thus transaction cost is high.

    Waiting for your reply Sir.

  21. Sure

    How to get these videos in English…..kindly suggest

  22. pruthvi

    Sir plzz uploand pdf with lecture(when you uploand lecture)
    Thank you sir

  23. Sundar

    Sir, I don’t understand HINDI, it would be very helpful if you take class in English. Thanks.

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