On 08.11.2016, when Modi demonetized 500/1000 Rupee Notes, RBI said that there were 15,84,000 Crores of 500/1000 Rupees notes that are in circulation and would need to be replaced. The total money in the ‘system’ was around 20,00,000 Crores (called M1 in economic terms).
Out of this 99.93% currency was exchanged by Indians by 30.12.2016. Leaving 0.07% notes as having not come back into the banks.
On 30.06.2021, the total money supply in the ‘system’ as per RBI is 48,00,000 Crores. Where did this extra 28,00,000 Crores come from?
If you realize that Government of India increased the money supply (M1) between 30.12.2016 to 30.06.2021 by 28,00,000 Crores by just creating it, then you’ll also realize that it can create another 6,00,000 Crores the same way.
That goes to show that Government can create money at will and indeed it has done that from December 2016 till June 2021. When it has created so much money, what is the need to sell/lease 6,00,000 Crores worth of assets to anyone?
Government is the only authority that creates money. And no it is not linked to quantum of gold held by it.
Thus the contention that Government does not have money is patently false and fake. Government has created all money that is presently in the system and it can create as much more that it wants (of course there are bad effects, same as having a bumper crop of tomatoes to sell).
And here’s the proof of increase in money supply (M1) from 2016 to June 2021.
