How old style chits still work as money: A case from Bangalore Buses..

November 28, 2017

With all this rise of digital/crypto currencies, the world is increasingly becoming complicated to figure. So stories of simple money forms are always welcome.

Rajagopalan Venkataraman of Times of India writes on how a Bangalore city bus conductor manages the currency show in his/her bus economy:

….bus conductor as a financial whiz kid? How could someone performing a mundane task such as selling tickets be equated to those pulling the strings behind economies of major nations and regions? That is because conductors have devised an informal currency of sorts, which is known as the ‘chit’.

Chit has been able to solve the abject lack of loose change or the now famous ‘chillar’ in our nation. After all, change is our most essential commodity, next to water and clean air. Such has been the impact of the chit that it has helped the bus conductors disburse change to hundreds and thousands of commuters over the years, possibly decades, without hitches. In an era where bitcoins and blockchain are the buzzwords, this should serve as a case study of sorts. But then, what is the chit?

Let us assume that you, dear reader, boarded a bus at the Majestic Bus Stand and purchased a ticket costing Rs. 21. Chances are the conductor does not have the change to be returned to the commuter, what with every second passenger handing him/ her currency notes of larger denominations. So, what does the conductor do? He could either ask you to alight, or scribble the amount to be returned on the back of the ticket and makes an incision on it. That becomes your chit. This ensures that the conductor can retain cash until your destination arrives.

Remember that this is done inside a jam-packed atmosphere — like the proverbial can of sardines — leaving him with little or no elbowroom. As your stop arrives, you merely produce the torn ticket to the conductor, who then returns the change. Equipment used: bus ticket, ballpoint pen, human ingenuity, currency notes.

Just like any central banker, the conductor has to figure ways through counterfeit chits:

To those of you who think that the system can be gamed and that a quick buck can be made on the side, here’s a suggestion: stupid idea. The conductor seems to write with a special ink. If you decide to match the ink and scribble the amount, you need to do it when the bus is not huffing and puffing on Bengaluru’s roads — an unlikely phenomenon. Added to that, your handwriting needs to match that of the conductor’s. Also, there is the overriding factor of the conductor’s memory. Failure to cross any of the hurdles will invite at best a rebuke; at worst, it will elicit a listing of your forefathers, ten generations before you. Added bonus: vivid descriptions of their anatomy, biological capabilities and their professions.

All these macro shocks neither effect them nor their bus economy:

The conductor’s cash-bag is indeed similar to the escrow account into which your money goes in at the time of purchase. The only exception is that the vendor and the escrow account here are the same. Safety, simplicity and ease of use are the hallmarks of the BMTC conductor’s chit.

 There could be a taper tantrum in the US, an economic downturn in the EU or an RBI rate hike cycle in India. Such phenomena mean zilch to the chit system, which works like clockwork through the year. The BMTC conductor could be the next RBI governor ? I think so and am ready to bet all my chits on the conductor.
We have made all these streams of economics so complicated to understand. These examples show how monetary economics does not need rocket science to figure as shown in our textbooks and several research papers. Much of it is simple and can be understood by these simple examples and from people who have hardly ever studied economics!

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