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INTRODUCTION TO CURRENCY

A currency (from Middle English curraunt, meaning in circulation) in the most

specific use of the word refers to money in any form when in actual use or

circulation, as a medium of exchange, especially circulating paper money. This use

is synonymous with banknotes, or (sometimes) with banknotes plus coins, meaning

the physical tokens used formoneyby a government.[1][2]

A much more general use of the word currency is anything that is used in any

circumstances, as a medium of exchange. In this use, "currency" is a synonym for

the concept ofmoney.[3]

A definition of intermediate generality is that a currency is a system of money

(monetary units) in common use, especially in a nation.[4]Under this definition,

British pounds, U.S. dollars, and European euros are different types of currency, or

currencies. Currencies in this definition need not be physical objects, but as stores

of value are subject to trading between nations in foreign exchange markets, which

determine the relative values of the different currencies.[5]Currencies in the sense

used by foreign exchange markets, are defined by governments, and each type has

limited boundaries of acceptance.

The former definitions of the term "currency" are discussed in their respective

synonymous articles banknote, coin, and money. The latter definition, pertaining to

the currency systems of nations, is the topic of this article.

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FLOW OF CURRENCY

The currency itself is actually just a flow of information. But there are two reasons

we myopically focus our attention o n the currency flow as if it is the one that

matters:

1) We are big-brained, symbol-using creatures, and it's much simpler to us to deal

with those nice clean symbols than the actual sloppy flows -- dollars are easier to

account for than time, random quantities of random things and other stuff which is

difficult to count (such as the state of relationships), and

2) The REAL flow is an event which happens in a moment and is gone. If you

were NOT there to witness the service being performed, the good being

exchanged, or the participation of that person, then once that moment has passed,

the only consistent way we have of knowing what occurred is the record we keep

of the event. We use currencies to keep records of currents.

I believe this is the single MOST CRITICAL CONCEPT for currency practitioners

to grasp. It allows us to break out of bad habits of thinking about currencies in very

outdated ways (such as believing they have or should have intrinsic value because

precious metals were once used as coins). This allows us to see currencies for what

they truly are: formal systems which shape, enable and measure currents which

allow communities to interact with those currents.

Let me paint a more concrete picture. Imagine being out for a walk in the snow,

and you see a set of small animal tracks where it bounded out from under a hedge

and crossed a field toward another shrub. Then you see them end in a sudden deep

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indentation, with some wingtip marks on extending out from either side. These

tracks tell a story -- a flow of resources and relationships that took place in that

field.

Of course, the story itself has passed. All we have left are the tracks. But the tracks

can tell quite a lot to the right set of eyes: what types of animals were involved,

how long ago it happened, which direction the bird flew off, etc. This is the role

that currencies play in our economy. Actual currents of resources and relationships

occurred and currencies are the tracks they left behind. The tracks are very

informative to the right eyes, so we use them to make business and policy

decisions.

Different currencies leave different tracks. The design of the currency makes

certain things visible and leaves others invisible. It also determines who has what

ranges of movement and track-laying powers.

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RUPEE VS DOLLAR

LETS and Time Dollars have flows of currencies as units are transferred from

account to account even if they are a mutual credit currency with a NET total of

zero units at all times. Individual account balances are not necessarily zero, and the

changes of these balances tell a story about relationships and resources as they

moved within the community. It is those counter-flows which the currencies

enabled and also the different mobility and track-laying powers that they gave to

people who may be disenfranchised from dollar access.

The real power that we gain from these insights is that MONEY is not the only

kind of CURRENCY. There are many other currencies that we use. We know that

we use currencies as a medium of exchange, but also as units of account or

measure, as stores of value, and even as tokens of status, worth or reputation.

Our real power as currency practitioners comes in understanding how we currently

use these tools in our communities to lay value-tracks and all the ways thatcurrencies can (and should) be used to track our stories of value.

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CURRENCY VS. MONEY

Currencies are symbolic tools we use to manage currents. They can function in a

number of independent capacities: as a unit of measure, store of value, token of

status and a medium of exchange, etc.

Monetary currency or money is a common way of bundling currency capacities to

create a medium of exchange for a commercial economy. It is a small portion of

the full spectrum of possible currency designs.

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CURRENCY TOKEN LIFE CYCLE:

The life cycle for each unit of a currency which starts with Issuance, then goes

through Transaction, Conversion & Retirement

A currency system defines these stages for its constituent tokens. Sometimes the

rules for a stage may be that no activitiy is allowed in that stage. For example,

most reputation currencies (such as a college degree) cannot be traded/transacted.

All currencies require rules for issuance but may exclude functions of any or all of

the latter 3 stages.

1. Issuance2. Transaction3. Conversion/Co-Function4. Retirement/Redemption

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HISTORY OF THE RUPEE

The history of the rupee traces back to Ancient India in circa 6th century BC,

ancient India was one of the earliest issuers of coins in the world,[1]along with

the Chinese wen and Lydian staters.

The word rpiya is derived form Dravidian word rpa, which means "wrought

silver, a coin of silver",[2]in origin an adjective meaning "shapely", with a more

specific meaning of "stamped, impressed", whence "coin". It is derived from the

nounrpa"shape, likeness, image". The word rpa is being further identified as

having sprung from the Dravidian ".[3]

Arthashastra, written by Chanakya, prime minister to the first Maurya

emperorChandragupta Maurya(c. 340-290 BCE), mentions silver coins

as rupyarupa, other types of coins including gold coins (Suvarnarupa), copper

coins ( Tamararupa) and lead coins (Sisarupa) are also mentioned. Rupa means

form or shape, example, Rupyarupa, Rupya - wrought silver, rupa - form.[4]

Afghan King Sher Shah Suri, during his five year rule from 1540 to 1545, set up a

new civic and military administration and issued a coin of silver, weighing

178 grains, which was termed the Rupiya.[2][5]The silver coin remained in use

during the Mughal period, Maratha era as well as in British India.[6]Among the

earliest issues ofpaper rupees include; the Bank of Hindustan (17701832),

the General Bank of Bengal and Bihar (177375, established by Warren Hastings),

and the Bengal Bank (178491).

The Indian rupee was a silver based currency during much of the 19th century;

which had severe consequences on the standard value of the currency, as stronger

economies at that time were on the gold standard. During British rule, and the first

decade of independence, the rupee was subdivided into 16 annas. Each anna was

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subdivided into either 4 paisas, or 12 pies. So One rupee was equal to 16 Annas, 64

Paises of 192 Pies. In 1957, decimalisation occurred and the rupee was divided into

100 Naye Paise (Hindi/Urdu for new paisas). After a few years, the initial "Naye"

was dropped.

For many years in the early and mid-20th century, the Indian rupee was the official

currency in several areas that were controlled by the British and governed from

India; areas such as East Africa, Southern Arabia and the Persian Gulf.

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EARLY USES

Silver coin of the Maurya Empire, known as Rupyarupa, with symbols of wheel

and elephant. 3rd century BCE.[4]

Ancient India in circa 6th century BC, was one of the earliest issuers of coins in the

world, along with the Chinese wen and Lydian staters. The first "rupee" is believed

to have been introduced bySher Shah Suri (14861545), based on a ratio of 40

copper pieces (paisa) per rupee.

The word rpiya is derived form Dravidian word rpa, which means "wrought

silver, a coin of silver",[2]

in origin an adjective meaning "shapely", with a more

specific meaning of "stamped, impressed", whence "coin". It is derived from the

nounrpa"shape, likeness, image". The wordrpa is being further identified as

having sprung from the Dravidian ".[3]

Arthashastra, written by Chanakya, prime minister to the first Maurya

emperorChandragupta Maurya(c. 340-290 BCE), mentions silver coins

as rpyarpa, other types of coins including gold coins (Suvarnarpa), coppercoins ( Tamrarpa) and lead coins (Sisarpa) are also mentioned. Rupa means form

or shape, example, Rpyarpa, Rpya - wrought silver, rpa - form.[4]

During his five year rule from 1540 to 1545, he set up a new civic and military

administration,Afghan king Sher Shah Suri issued a coin of silver, weighing

178 grains, which was termed the Rupiya. The silver coin remained in use during

the Mughal period, Maratha era

[6]

as well as in British IndiA

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RUPEES IN ECONOMIC CRISIS

1966 Economic crisis

From 1950, India ran continued trade deficits that increased in magnitude in the

1960s. Furthermore, the Government of India had a budget deficit problem and

could not borrow money from abroad or from the private corporate sector, due to

that sector's negative savings rate. As a result, the government issued bonds to the

RBI, which increased the money supply, leading to inflation. In 1966, foreign aid,

which had hitherto been a key factor in preventing devaluation of the rupee, was

finally cut off and India was told it had to liberalise its restrictions on trade before

foreign aid would again materialise. The response was the politically unpopular

step of devaluation accompanied by liberalisation. Furthermore, The Indo-

Pakistani War of 1965 led the US and other countries friendly towards Pakistan to

withdraw foreign aid to India, which necessitated more devaluation. Defence

spending in 1965/1966 was 24.06% of total expenditure, the highest it has been in

the period from 1965 to 1989 (Foundations, pp 195). Another factor leading to

devaluation was the drought of 1965/1966 which resulted in a sharp rise in prices.

At the end of 1969, the Indian Rupee was trading at around 13 British

pence[clarification needed]. A decade later, by 1979, it was trading at around 6 British

pence. Finally by the end of 1989, the Indian Rupee had plunged to an all-time low

of 3 British pence. This triggered a wave of irreversible liberalisation reforms away

from populist measures.

1991 Economic crisis

In 1991, India still had a fixed exchange system, where the rupee was pegged to

the value of a basket of currencies of major trading partners. India started having

balance of payments problems since 1985, and by the end of 1990, it found itself in

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serious economic trouble. The government was close to default and its foreign

exchange reserves had dried up to the point that India could barely finance three

weeks worth of imports. As in 1966, India faced high inflation and

large government budget deficits. This led the government to devalue the rupee.[9]

At the end of 1999, the Indian Rupee was devalued considerably.

Revaluation

In the period 20002007, the Rupee stopped declining and stabilized ranging

between 1 USD = INR 4448. In late 2007, the Indian Rupee reached a record high

of Rs.39 per USD, on account of sustained foreign investment flows into the

country. This posed problems for major exporters, IT and BPO firms located in the

country who were incurring losses in their earnings given the appreciation in rupee.

The trend has reversed lately with the 2008 world financial crisis as Foreign

investors transferred huge sums out to their own countries. Such appreciations

were reflected in many currencies, e.g. the British Pound, which had gained value

against the dollar and then has lost value again with the recession of 2008.

2013 Depreciation

Due to stagnant reforms, and declining foreign investment, rupee started

depreciating in the early 2013.[10]As a result, the Indian Rupee dropped to 68.80

per dollar. Various measures were announced by the Government prior to this drop

to prevent it from dropping further. But, none managed to slow down the

depreciation.[11]After continued depreciation, and high inflation, the Prime

Minister of India, Shri Manmohan Singh, made a statement in the Parliament of

India on the issue. He was of the view that, the present depreciation is partly led by

global factors as well domestic factors. He also asked the political parties to help

his Government tide over the crisis that the country was facing with rupee losing

its value

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CURRENCY

Early paper issues

Notes issued by the Bank of Bengal can be categorised in the following three

series.

Unifaced series: The early notes of the Bank of Bengal were printed only onone side and were issued as one gold mohur and in denominations of Rs. 100,

Rs. 250, Rs. 500, etc.

Commerce series: Later notes had a vignette representing an allegorical female

figure personifying 'commerce'. The notes were printed on both sides. On theobverse the name of the bank and the denominations were printed in three

scripts, viz., (Urdu, Bengaliand Devanagari). On the reverse of such notes was

printed a cartouche with ornamentation carrying the name of the Bank.

Brittania series: By late 19th century, the motif 'commerce' was replaced by'Britannia'. The new banknotes had more features to prevent forgery.

British India issues[edit]

The Paper Currency Act of 1861 gave the Government the monopoly of note issue

throughout the vast expanse of British India, which was a considerable task.

Eventually, the management of paper currency was entrusted to the Mint Masters,

the Accountant Generals and the Controller of Currency.

Victoria portrait series: The first set of British India notes were the'Victoria Portrait' series issued in denominations of 10, 20, 50, 100 and 1,000.

These were unifaced, carried two language panels. The security features

incorporated the watermark, the printed signature and the registration of the

notes.

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Underprint series: The unifaced Underprint series was introduced in 1867 asthe Victoria Portrait series was withdrawn in the wake of a spate of forgeries.

These notes were issued in denominations of Rs 5, 10, 20, 50, 100, 500, 1,000

and 10,000.

George V series: A series carrying the portrait ofGeorge V were introduced in1923, and was continued as an integral feature of all paper money issues of

British India. These notes were issued in denominations of Rs 1, 2, 5, 10, 50,

100, 1,000, 10,000.

Reserve Bank issues during British India

The Reserve Bank of India was formally inaugurated on Monday, April 1, 1935

with its Central Office at Calcutta. Section 22 of the RBI Act, 1934, empowered it

to continue issuing Government of India notes until its own notes were ready for

issue. The bank issued the first five rupee note bearing the portrait ofGeorge VI in

1938. This was followed by Rs. 10 in February, Rs 100 in March and Rs 1,000 and

Rs 10,000 in June 1938. The first Reserve Bank issues were signed by the second

Governor, Sir James Taylor. In August 1940, the one-rupee note was reintroduced

as a wartime measure, as a Government note with the status of a rupee coin.

During the war, the Japanese produced high-quality forgeries of the Indian

currency. This necessitated a change in the watermark. The profile portrait of

George VI was changed to his full frontal portrait. The security thread was

introduced for the first time in India. The George VI series continued till 1947 and

thereafter as a frozen series till 1950 when post-independence notes were issued.

Republic of India issues

Following the Independence of India the Government of India brought out the new

design Re. 1 note in 1949. Initially it was felt that the King's portrait be replaced by

a portrait ofMahatma Gandhi. Finally however, the Lion Capital of Asoka was

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chosen. The new design of notes were largely along earlier lines. In

1953, Hindi was displayed prominently on the new notes. The economic crisis in

late 1960s led to a reduction in the size of notes in 1967. High denomination notes,

like Rs. 10,000 notes were demonetised in 1978.

The "Mahatma Gandhi Series" was introduced in 1996. Prominent new features

included a changed watermark, windowed security thread, latent image and

intaglio features for the visually handicapped.

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CONTROL AND PRODUCTION

In most cases, a central bankhas a monopoly right to issue of coins and banknotes

(fiat money) for its own area of circulation (a country or group of countries); it

regulates the production of currency by banks (credit) through monetary policy.

An exchange rate is the price at which two currencies can be exchanged against

each other. This is used fortradebetween the two currency zones. Exchange rates

can be classified as eitherfloating orfixed. In the former, day-to-day movements

in exchange rates are determined by the market; in the latter, governments

intervene in the market to buy or sell their currency to balance supply and demand

at a fixed exchange rate.

In cases where a country has control of its own currency, that control is exercised

either by a central bankor by a Ministry of Finance. The institution that has control

of monetary policy is referred to as the monetary authority. Monetary authorities

have varying degrees of autonomy from the governments that create them. In

the United States, the Federal Reserve System operates without direct oversight by

the legislative or executive branches. A monetary authority is created and

supported by its sponsoring government, so independence can be reduced by the

legislative or executive authority that creates it.

Several countries can use the same name for their own separate currencies (for

example, dollar in Australia, Canada and the United States). By contrast, several

countries can also use the same currency (for example, the euro), or one country

can declare the currency of another country to be legal tender. For

example, Panama and El Salvadorhave declared U.S. currency to be legal tender,

and from 1791 to 1857, Spanish silver coins were legal tender in the United States.

At various times countries have either re-stamped foreign coins, or used currency

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board issuing one note of currency for each note of a foreign government held,

as Ecuadorcurrently does.

Each currency typically has a main currency unit (the dollar, for example, or

the euro) and a fractional unit, often defined as 1100 of the main unit: 100 cents =

1 dollar, 100 centimes = 1 franc, 100 pence = 1 pound, although units

of110 or11000 occasionally also occur. Some currencies do not have any smaller

units at all, such as the Icelandic krna.

Mauritania and Madagascarare the only remaining countries that do not use the

decimal system; instead, the Mauritanian ouguiya is in theory divided into

5 khoums, while the Malagasy ariary is theoretically divided into 5 iraimbilanja. In

these countries, words like dollaror pound "were simply names for given weights

of gold."[11]Due to inflation khoums and iraimbilanja have in practice fallen into

disuse. (See non-decimal currencies for other historic currencies with non-decimal

divisions).

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DESIGN

The new signs a combination of the Devanagari letter "" (ra) and the Latin capital

letter"R" without its vertical bar (similar to the R rotunda). The parallel lines at the

top (with white space between them) are said to make an allusion to the

tricolorIndian flag. and also depict an equality sign that symbolizes the nation's

desire to reduce economic disparity. It was designed by a Tamil an Udaya Kumar

Dharma lingam, at the Industrial Design Centre at the Indian Institute of

Technology, Bombay.

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NUMERAL SYSTEM

The Indian numeral system is based on the decimal system, with two notable

differences from Western systems using long and short scales. The system is

ingrained in everyday monetary transactions in the Indian subcontinent.

Indian semanticInternational

semantic

Indian comma

placement

International comma

placement

1 lakh 100 thousand 1,00,000 100,000

10 lakhs 1 million 10,00,000 1,000,000

1 crore 10 million 1,00,00,000 10,000,000

10 crores 100 million 10,00,00,000 100,000,000

1 Arab 1 billion 1,00,00,00,000 1,000,000,000

10 Arabs 10 billion 10,00,00,00,000 10,000,000,000

1 kharab 100 billion 1,00,00,00,00,000 100,000,000,000

10 kharabs 1 trillion 10,00,00,00,00,000 1,000,000,000,000

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1 padam(shankh) 10 trillion 1,00,00,00,00,00,000 10,000,000,000,000

10

padams(shankhs)100 trillion 10,00,00,00,00,00,000 100,000,000,000,000

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INDIAN RUPEE REPLACED

The Indian rupee replaced the Danish Indian rupee in 1845, the French Indian

rupee in 1954 and the Portuguese Indian escudo in 1961. Following the

independence of British India in 1947 and the accession of the princely states to

the new Union, the Indian rupee replaced all the currencies of the previously

autonomous states (although the Hyderabadi rupee was not demonetised until

1959).[13]Some of the states had issued rupees equal to those issued by the British

(such as the Travancore rupee). Other currencies (including the Hyderabadi rupee

and the Kutch kori) had different values.

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THE VALUES OF THE SUBDIVISIONS

The values of the subdivisions of the rupee during British rule (and in the first

decade of independence) were:

1 rupee = 16 anna (later 100 naye paise) 1 artharupee = 8 anna, or 1/2 rupee (later 50 naye paise) 1 pavala = 4 anna, or 1/4 rupee (later 25 naye paise) 1 beda = 2 anna, or 1/8 rupee (later equivalent to 12.5 naye paise) 1 anna = 1/16 rupee (later equivalent to 6.25 naye paise) 1 paraka = 1/2 anna (later equivalent to 3.125 naye paise) 1 kani (pice) = 1/4 anna (later equivalent to 1.5625 naye paise) 1 damidi (pie) = 1/12 anna (later equivalent to 0.520833 naye paise)In 1957, the rupee was decimalised and divided into 100 naye paise (Hindi for

"new paise"); in 1964, the initial "naye" was dropped. Many still refer to 25, 50

and 75 paise as 4, 8 and 12 annas respectively, similar to the usage of "two bits" in

American English for a quarter-dollar.

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