Monetary Economics for Stakeholders? A Second Look on Causes of Inflation and Monetary Underpinnings

Conventional analysis explores the reasons of inflation in the Quantity Theory of Money, which describes the relation between Money and Prices. However, beside the QTM, there is another phenomenon which is responsible for high inflation i.e. the Inherent Gap. When a bank gives loan to a borrower, the borrower has to pay the principal amount plus interest rate, but the existing stock do not have enough money to pay back. This is because the banks create only the principal amount they don’t create the interest amount. Any amount of money coming into economy will be again through the banks in shape of debt, which will increase the gap between amount present in the economy and amount to be repaid by the borrowers. This shortfall of money is the Inherent Gap, leaving borrower in very fragile situation, of facing undue pressure – including social pressures – or in extreme conditions faces default_x0008_ankruptcy. It leads towards the most prominent, ever know notion, ‘By God this is the least pric