Paper money or banknote is an interest free promissory note issued by a central bank of a country. It represented a store of value, backed by the credibility of the issuing authority.
Commodity money or coins will have some intrinsic value along with the face value. But paper money doesn’t have any intrinsic value.
Disadvantage of paper currency:
As printing paper money is easier than minting coins, there are more chances to produce Counterfeit money by anti-national elements and crime syndicates.
When Counterfeit money injected into the economy of a county it leads to the following problems
When too much money chases two few goods the price of goods increase that is inflation.
There is nothing to stop the issuing authorities from printing more paper money (creating credit) to fund government activity or to inject liquidity in the banking system, thus creating inflationary pressures resulting in the cost of living and prices to rise.
The legal way to handle is to lodge a police complain and mention the source of the currency and then further investigations are done. The fake currency is then sent to RBI or destroyed.
Commodity money or coins will have some intrinsic value along with the face value. But paper money doesn’t have any intrinsic value.
Disadvantage of paper currency:
As printing paper money is easier than minting coins, there are more chances to produce Counterfeit money by anti-national elements and crime syndicates.
When Counterfeit money injected into the economy of a county it leads to the following problems
When too much money chases two few goods the price of goods increase that is inflation.
There is nothing to stop the issuing authorities from printing more paper money (creating credit) to fund government activity or to inject liquidity in the banking system, thus creating inflationary pressures resulting in the cost of living and prices to rise.
The legal way to handle is to lodge a police complain and mention the source of the currency and then further investigations are done. The fake currency is then sent to RBI or destroyed.
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