Can we destroy Currency?


Lot of people consider that every time money is spent on some seemingly no profitable work, money is wasted. For example: Elections and wedding parties. However, money spent is not necessarily money waste. Actually, every time someone spent a big amount of money it boosts the economy. Money is wasted when it is destroyed without information. The worst thing for economy is when people keep money stored in their homes or in Swiss bank as black money. If you stop circulation of huge amount of money, it will drastically affect economy of country.

Irrespective of popular notion that when we spent money extravagantly, we are ruining our country wealth, the truth is we must support every such event. Let us take the example of election. In digital India, elections are also digitalized. 24 x 7 you can see advertisements of political parties on electronic and print media. In four years, Modi Government spent total of Rs 4,343.26 crore on advertisements and publicity through different media, according to a RTI. This money could have been used for some more important works too, but it will be wrong to state that this money is wasted. Money only changed hands. While changing hands a fraction of it will go to poor labourers, spot boys, technicians, wall painters and junior artists. Though, that might not be the intention but it is by-product of publicity expenditure. Thus, money spend on publicity is not wasted. It just moved from a political entity to media houses and their workers, journalist, technicians and artist.

Similarly, in marriages, when people spent lot of money, this money does not go anywhere. It just changes hands. More importantly, in some cases, black money entered into circulation once again.

The question that arises in mind is how money is actually wasted or destroyed. Talking literally, if you burn money without informing government, it will be lost permanently and it will cause deflation. Deflation means cost of goods will decrease. Since only small percentage of net wealth is in the form of currency, burning few notes will not create any effect. However, please note that, burning currency notes is illegal in many countries.  Even if your currency is damaged during natural disaster or otherwise, you can send it for replacement. Never throw or destroy any denomination of currency notes.

Let us take another example: An aeroplane is destroyed in mid-air with 100 passengers. All died on board and plane was lost in Deep Ocean. Suppose cost of plane was 1 million $. Is this 1 million $ destroyed? No, it’s not. Cost of plane is determining by the material and labour used. When you purchased the plane, you paid its full cost. When the plane was destroyed, your individual wealth reduced, but not the currency in circulation. Hence, we can say that individual’s wealth keep increasing or decreasing, but money does not decrease. Money only changes hands.