When Money Dies - India's Demonetization Is A "Massive Man-Made Disaster"

Tyler Durden's picture

Submitted by Jayant Bhandari via Acting-Man.com

When Money Dies

In part-I of the dispatch we talked about what happened during the first two days after Indian Prime Minister, Narendra Modi banned Rs 500 and Rs 1000 banknotes, comprising of 88% of the monetary value of cash in circulation. In part-II, we talked about the scenes, chaos, desperation, and massive loss of productive capacity that this ban had led to over the next few days.

 

modi-belgaum-pti-759

Indian prime minister Narendra Modi – another finger-wagger, as can be seen in this photograph. Beware finger-wagging politicians, as we always point out. Modi now plans to impose income tax penalties on large bank deposits; the State’s rapaciousness knows no bounds and evidently the mere possession of some arbitrary amount of money considered “too large” now means one is deemed a criminal a priori in India. It goes without saying that the concept of property rights is alien to Modi. [PT]

Photo via indianexpress.com

 

Now, two weeks later, the situation is getting much worse, and more desperate. It is obvious that Modi single-handedly took the decision to ban the banknotes, with most people in his cabinet and virtually all in the central bank oblivious to his plan.

There is virtually no visible opposition to the enforced ban, for any politician who opposes the ban risks having his own misdeeds — and they are all corrupt — brought to the public space by Modi. A true demagogue, Modi, has already convinced the gullible, salaried middle class that anyone who opposes the ban is hiding corrupt money and is anti-national.

With every passing day, it has not only  become clearer that the ban was of no use to eradicate hidden cash, but has also inflicted deep, wide and irreparable damage to the society.  The economy is rapidly moving toward stagnation.  The lives of literally hundreds of millions are in deep chaos.

This event may well go down in the history books as one of the worst man-made crises ever.

Cash conversion has been reduced to Rs 2000 ($30) per person. As a result people are  facing humiliation and stand in queues for as much as 12 hours or more. Often repeated visits to the bank are necessary, with no guarantee that the bank will have cash available for the conversion. Old and disabled people, the 25% of India’s society without  ID-cards, and women (unless they are prepared to be molested) don’t even have this chance. For those who are able join the queues, the scene has turned into a battlefield, with people fighting among themselves and getting brutalized by the police. But so far most people seem to still carry a favorable opinion of Modi, backed by cult-like “intellectual” climate created by the salaried middle class (who lack critical thinking and reasoning capability), and supported by the international media and institutions like the IMF, i.e., people who are sitting in Western cities have no clue about the realities on the ground. But all this will change as the stories of personal suffering should eventually start to dominate over the propaganda—reality does have a way of catching up. But India’s descent toward a police state is now written in concrete. Even if Modi eventually goes, a new demagogue will take his place.

Should a single person have so much power to be able to destroy the lives of almost one out of every five human beings on the planet? On this occasion it may be worth reminding ourselves that Modi also has the authority to launch nuclear bombs.

Modi suffers from worst possible type of corruption: an insatiable desire for personal glory at any cost, an extremely deep moral and spiritual corruption. He also represents the worst aspect of democracy: a demagogue who caters to an irrational populace’s cravings for self-identity and release from self-responsibility.

The government monopoly on cash economically connects 1.3 billion Indians. The perceived value of this paper currency does not comes not from any value inherent in it (it is just as irredeemable as other fiat monies), but from government edicts.

Cash is the thread that weaves relationships, transactions and commitments. For the proper functioning of society, it is absolutely crucial that people have a liquid medium of exchange, the essential lubricant to effect trade in today’s complex economy. Today, win-win transactions — except for barter, which has emerged in many parts of India — can no longer take place, for the monopolistic money instrument, India’s fiat currency, has been paralyzed by Modi.

Two millennia of progress in money have been destroyed. Rural places are increasingly falling back on barter. In a barter economy, economic calculation is no longer possible; only the most basic economic exchanges can take place. The market will have to adopt alternative media of exchange if the coincidence of wants problem is to be overcome.

 

Should a single person have the authority to flip a switch and bring all trade, transactions, indeed the entire economy to a halt?

As it stands, money is now dead in India – and a police state is rapidly encroaching. Both at home and abroad the only topic of conversation for Indians is the currency ban. If they are not busy planning how to escape the depredations of the tax authorities (whose minions are rapacious and will insist that people be obsequious and pay them large bribes), people exchange slogans, sound-bites and mere hopes  – which seems to be the best India’s irrational society can do. Should this be all people are communicating about? Human beings were destined for higher things in life, not merely for the task of protecting themselves against the State.

What tyranny, socialism and an authoritarian order enforced from the top down mean for those who have been reduced to mere cogs

 

Crumbling Institutions

Most people — particularly the salaried middle class — still seem to have a favorable opinion of Mr. Modi. They have been indoctrinated – in India’s extremely irrational and superstitious society – to believe that this demonetization will somehow alleviate corruption and that anything but support of Modi’s actions is anti-national and unpatriotic.

This gives me pause to reflect.

What a crazy idea it is to have a State monopoly on money, particularly a money that carries no inherent value and depends on regulatory edicts.  On a deeper level, it makes me reflect on why for the culture of India — which is tribalistic, nativistic, superstitious and irrational — “India” is actually an unnatural entity.

Such a society should consist of hundreds of tribes and countries, which is what “India” was before the British consolidated it.  In a tribalistic and irrational society, decentralization makes life much safer and makes the market more free, as complex decisions will be taken on the local level, where they belong.

India’s institutions — not just organizations, but larger socio-political beliefs — have begun to decay and crumble after the British left, losing their underlying essence, the reason for which they had been institutionalized in the first place. This degradation is now picking up pace. They must eventually fall apart — including the nation-state of India –  to adjust to the underlying culture .

Let us consider some of these institutions. Western education implanted in India has mutated. It is making individuals cogs in a big machine, all for the service of one great leader. Public education and the mass-media have become instruments of propaganda.

Complexity and the diversity of options that technology brings make an irrational thinker extremely confused, forcing him to seek sanity in ritualistic religion —hence the increase in religiosity in India and elsewhere in the region. This has happened despite the explosion in information technology.

The concept of the nation-state, when it took hold in Europe, was about the values the emergent rational and enlightened societies of Europe shared and had collectively come to believe in, at least among their elites. In India, the idea of the nation-state has morphed into a valueless thread, which binds people together through nothing but a flag and an anthem, symbols completely devoid of any values.

It has collectivized tribalistic and irrational people (an irrationality that is amply epitomized by the  negative force Islam has become in the last two decades). In India and many similarly constituted countries, institutions that are not natural to their culture— the nation state, education, monetary system, etc. — must eventually face entropy, slowly at first, and then rapidly.  India has now entered the rapid phase.

The death of money – amid a lack of respect for property rights (which again are a purely European concept that emerged from the intellectual revolutions of the last 800 years) – has been sudden and will very likely be catastrophic. It is a man-made disaster of gargantuan proportions.  It will fundamentally change India in a very negative way, particularly if the demonetization effort succeeds, as it will have created the foundations enabling the rapid emergence of a police state.

 

A Rapidly Evolving Police State

After just a few years under Modi’s rule, there is no independent body left in India. Courts simply do not take a position against Modi. Not that the situation was much better earlier, mind. These days, journalists and opposing voices are increasingly stifled, while people at the fringe at least spoke their mind in the past.

For the first time, Hindus who were tolerant of intellectual differences have come to believe in Hindutava (fanatic Hindu nationalism, rapidly metastasizing as a particular mutation of nationalism).

Police now reserves the right to randomly search people’s possessions without a warrant. Those who live in India — in an economy in which 97% of all consumer transactions are in cash, most salaries are paid in cash, and most revenues are collected in cash — routinely transport and carry large amounts of cash on their person.

When policemen stop them, they often find some cash, which now ends up being confiscated and used for the Modi propaganda machine. None of this means that the confiscated cash is illegal, undocumented, or involved in tax evasion efforts. But truth has no place in propaganda.

 

demonetisation

A regular sight outside of bank branch offices, where poor desperate people laid off from work because of the monetary crisis must bear insults and physical harm from the police, all for the “greater good” and a “corruption-free” India

 

The fear among small businessmen and those with savings outside of the banking system, even if they are fully legitimate, is palpable. They are now deemed to be criminals and it is their job to prove themselves innocent.

They are extremely afraid of facing tax inquiries, which always involve heavy penalties and large bribes (the level of which has gone up noticeably in this police state). Whatever small focus they previously had on wealth-creation is now gone.

Historically, India has been a negative-yielding economy. Interest rates have mostly been negative in real terms. Stock market returns are negative-yielding, even before adjusting for business and jurisdictional risks. In such an environment, savers have no option but to keep their money in gold, or outside the formal economy.

Any oppression of savers forcing them to direct their money into the negative-yielding formal economy will only lead to even more of their savings going into gold and escaping to foreign jurisdictions, eventually making India much less well-off. Even in the short-term, India’s economy is rapidly going into paralysis.

 

deadman

An old man has died in the queue at the bank. No one came to help him, due to the risk of losing their place in the queue. A large number of people have died in similar circumstances.

 

Corruption is Entrenched Across India

There is indeed a belief that at the very top, financial corruption has declined. I have no way to be sure of this, but I am tempted to believe it. But India’s proximal problem is with its bureaucracy and lower-level politics.

I have yet to meet a public servant who does not ask for a bribe. Simple financial corruption would have merely redistributed wealth. But the real problem with the public servant is his utter moral and spiritual corruption.

He expects citizens to grovel, a sadistic pleasure every Indian public servant enjoys in his demeaned existence. He is incapable of taking a decision or of thinking straight. It is here that the State suffocates society and wealth-creation. This is the real corruption characterizing the State.

More fundamentally, the real problem of India is not even its bureaucracy, but Indians as such.  Indians will pay and take bribes when given an opportunity. They will strive to get into positions that give them the power over other people. They know exactly how others should live. The fingers of my hands exceed the number of Indians I have known who are different.

But hasn’t the way Indians view corruption changed in recent times, given that they are supporting Modi in his fight against corruption, however erroneous his policies might be?

An irrational society is also deeply hypocritical and can exist with massive cognitive dissonance. If you delve deeper into the issue, you realize that Indians do indeed want corruption to end, but with a minor exception. They want everyone to stop giving and taking bribes simultaneously and collectively.

As in any collectivist society, the individual has no value or meaning, so the individual Indian excludes himself when he wants corruption to end. He does not see how any meaningful impact on society at large might be achieved if he were to stop his own corruption. As any rational person can see, this does not add up – but in the irrational society of India it does seem to add up.

I often find myself in social conversations in which everyone talks badly about corruption in others and in the public space and makes proposals how to end it, and in the next breath, the very same people collude between themselves, engaging in corrupt practices. When I point the contradiction out to them, they simply and honestly fail to see it.

A rational personal cannot truly understand this issue, even when repeatedly told about it, as rational people suffer from a major handicap: they fail to understand the true nature of irrationality and how entrenched it can be.

 

no-evidence

In 2013, shortly  ascending to India’s most powerful political post, Modi was exonerated by the courts in the Gujarat riots case ex-post – an exercise that stretches credulity for many. It has taken many years for the SIT commission examining the case to release its report and quite a few people still think it was simply a whitewash attempt (we are in no position to judge or opine on the matter – we merely point out that it remains disputed – PT)

Cartoon by Narsimha P

 

Modi was allegedly behind the massacre and rapes of thousands of Muslims in 2002 when he was the Chief Minister of the Indian state of Gujarat. As a result of this, Modi was banned from entering most Western countries. Modi has no family. He left his wife soon after he married.

He does not let his 94-year-old mom stay with himself. He claims he has given up his family for the nation. In his narrow vision, he is indeed correct. While he may personally not have taken any bribes in recent years, there is no way he could have risen to his position without having made massive and horrendous moral compromises, as the massacre of Muslims to gain Hindu votes demonstrates.

Financial corruption is merely the tip of the iceberg. Those obsessed with financial corruption forget something very important. Financial corruption is the most enlightened aspect of corrupt activities, for at least it is win-lose. Ending financial corruption from the top down cannot or will not improve a society. If it could, Eritrea and North Korea would be the richest countries in the world.

What keeps India in continual penury is its irrationality, its tribalism and its superstitions, of which financial corruption is merely a visible expression. There is no easy way to make a society rational. In the past, European missionaries even tried removing babies from their parents in a desperate attempt to bring about change. This didn’t work. Making a society rational is a process that could last  millennia.

For now, India is in essence becoming more corrupt, even if obvious financial corruption eventually recedes for fear of the autocrat, as has been the case in Eritrea. India is becoming rather more nationalistic, fundamentalist, tribalistic and irrational.

The cult-like status Modi enjoys in India is the result of a lack of self-responsibility among Indians, their hope that despite massive inherent contradictions, the pain that corruption imposes on Indians can be got rid of through a magic wand –  without self-reflection, or without them giving up corruption themselves.

Modi’s biggest support comes from the salaried middle class, whose members are mostly unaffected by the ban, and who may even have benefited as food prices have fallen as a result of the masses of starving poor people now unable to buy. Hence the middle class can claim to occupy the moral high-ground, albeit on the back of other people’s suffering.

 

farmers-protest

Protesting farmers in India. Buyers cannot buy products for they no longer have access to their own money. Unable to sell, sellers are stuck with their produce and cannot pay their debts, driving them  and their creditors into bankruptcy. This is a very complex vicious cycle. Even if liquidity is eventually restored — which is unlikely — the demonetization has crippled the production system.

 

food-market

Depending on who you ask, even food market sales have fallen by 20% to 80%. It is too early to say if people are eating less or if they are consuming emergency stores they have kept at home; perhaps both. If farmers cannot sell their food, they cannot buy seeds for the next planting season. A vicious cycle is going to get entrenched.

Indian Express photos: Pavan Khengre

 

Gresham’s Law Gone Wild

In the past two weeks, the government has completely failed to reliquefy the monetary system. With 88% of outstanding currency now illegal, people are rushing to convert the banned currency they hold into Rs 100 or lower denomination banknotes. Once these or the newly printed banknotes end up with financially strong persons, they straight-away go under the mattress.

The result is that the remaining 12% of the monetary value represented by banknotes that are still legal is rapidly going out of circulation, and so is most of the newly issued currency. Markets are empty. This means cash is not trickling down. The poorest 50% of India’s population, who have no reserves, are the worst affected and are going hungry.

 

gresham

16th century British financier Thomas Gresham famously explained in a letter to Queen Elizabeth upon her accession to the throne that “good and bad coin cannot circulate together”  and explained that due to the coin debasements practiced by her predecessors Henry VIII and Edward VI, “all your fine gold was convayed [sic] out of this your realm”.

Painting by Anthonis Mor

 

Ironically, the banned Rs 500 and Rs 1,000 banknotes are today the most used currency. Those who have these banknotes and are afraid of going to the bank, mostly because they are worried about unnecessary problems from the rapacious and extremely corrupt tax department, force their workers and suppliers to accept the banned notes.

In the local market, if you want to buy gold or silver, you must pay in the banned banknotes — ironically the sellers to do not want to accept official legal tender. The banned notes, when used in large quantities, are circulating at 80% or less of their face value. Mafias have spontaneously emerged around the country. They ensure that these banknotes are deposited across hundreds of millions of accounts. The mafia makes a neat 25% profit.

The mafia is also providing special favors to certain politicians by converting their ill-gotten money for no commission. Who thinks this will reduce corruption?

Many workers from factories and shops, even if they have not yet been thrown out of work for lack of demand or due to the cash-crunch affecting their employer, have found a very lucrative profession. They now work for the money-converting mafia. This system is already fully in place a mere two weeks after the announcement of the ban.

The underground system is rapidly distributing the banned currency notes across a large number of people who then deposit them. This market is so liquid and easily accessible, that for all intents and purposes there is no way that someone with the banned notes cannot exchange them, albeit at a loss. So much for Modi’s claim that those with large amounts of undeclared money won’t be able to convert or deposit it.

But this will get much worse. When all this is over, hundreds of thousands of small-time bullies trained by the mafia will have made a small fortune. They will have also have found out who the rich people with cash are. A social scientist will conclude that this segment of society will be extremely corrupt and criminal. These people will have gotten a taste for easy money, in contrast to patient and laborious wealth-creation.

 

Moral Dilemmas Galore

Poor people have traditionally never systematically robbed shops in India. Out of hunger, they are experimenting with this for the first time. They are learning that when a mob robs, the police disappears. Social relations have a taken a very serious hit, fragmenting society. Society stands hugely divided, except in terms of the thread that connects them to Modi, the autocrat.

 

snake-charmer

Modi, the snake charmer?

Cartoon by Chappatte

 

What keeps transactions in any society going is liquidity in the money-markets. Given that most people are stuck with banned currency, they are telling anyone they owe money to that they will only make payment in form of the banned notes, which now trade at a discount.

This massive moral dilemma has come to appear because people found themselves stranded with banned notes overnight, and want to avoid the 20% hit in value that they will have to take by converting them through the mafia.

Imagine someone who has collected ten million rupees in cash, facing the ban a day before he had to return the money to someone he borrowed from. What is  he likely to do? Force his creditor to accept these banned notes, or bear the loss of 20%, which he might not have the capacity to absorb?

Spouses are fighting, as they have suddenly become aware that their significant other has been hiding cash for a rainy day. Poor people are almost invariably getting paid in banned notes, which requires them to line up in queues the next day to convert what they received, wasting at least 50% of their productivity –  assuming they have a job.

There are moral dilemmas galore. But this had to happen in a society run by rulers who have absolutely no sense of morals, reason, not to mention respect for private property.

Money deposited in the banks is mostly frozen, something that people are not yet paying much attention to, for all their focus is on getting rid of the banned cash. The problem of frozen bank accounts will surface once the current conversion stops by the end of this year. That is when the salaried middle class, which mostly supports Modi, will finally wake up.

It is also clear that Modi has to take more and more increasingly repressive steps to keep people from taking protective measures. As noted above, India will rapidly become a police state.

The worst sufferers are poor people, whose ownership of currency was neither unaccounted for nor corrupt. Not being street-smart and not understanding how banks work, as they are often bullied by standoffish bank officers, they are stuck with the old currency, clueless as to what to do.

They are the silent 25% to 50% of the India population. They cannot even participate in the money-converting mafia, because they don’t understand many of the things that look quite simple to members of the middle class.

 

Many tourists have found themselves stranded without money in India as well. Video by mint.

 

Conclusion

India faces a highly uncertain future. A vicious cycle has been set into motion by Modi and it will not end well. Unpredictable problems and unintended consequences are bound to surface incessantly. If Modi comes under sufficient  pressure, he could easily go to war with nuclear-armed Pakistan

Modi, in his permament search for personal glorification could easily impose a state of emergency or martial law. This is in fact extremely likely, perhaps even inevitable, for the so-called intellectuals will beg for it.

As we have said previously: this will go down in the history books as one of the most naïve, least thought through policy decisions ever, a massive man-made disaster.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
katagorikal's picture

In 1850, around 300 million Indians were ruled by about 1,000 British District Officers and senior civil servants, backed by 50,000 British troops. About half the land area was not ruled directly by the British, but through local rulers of the Princely States, each with a British Resident diplomat. There were 250 districts in the British zone, so each District Officer (usually in his mid 20s) was responsible for the administration, finances and legal appeals for an average of 600,000 people - rising to 1 million people later in the century.

HenryHall's picture

So why doesn't enterprising Pakistan say:

"Come. change your 500 and 1000 Rupees banknotes to Pakistan cash"?

Then when Indian (or any foreign) banks try to convert the Pakistan banknotes back they are refused by the Pakistan banks until/unless they take 500/1000 Rupees banknotes in exchange.

It wouldn't cost Pakistan so much to print paper banknotes but the long term effects of wide circulation of Pakistan money throughout India will benefit Pakistan hugely in the long term. Not to mention healthy short term commissions on the exchange!

Stu Elsample's picture

if you peons in India have not yet stormed the goverment buildings and killed off every power hungry fascist politician then you deserve what you have coming

Snaffew's picture

as an American---people in glass houses shouldn't throw stones

Stu Elsample's picture

i'm on welfare...i don't need cash

Korprit_Phlunkie's picture

Thats funny, sad or true depending on who you are.

g'kar's picture

Probably not a good idea to fuck with 1+ billion Indian's money

personal109's picture

Indian dumb asses.  

radbug's picture

Could it be, could it be? That we exclude India, along with Africa, from the Demographic Cliff idea? If so, then 2017 will be the turning point in a much more drastic downturn in the global demand side than previously forecast. All of the variables upon which the global marketplace was built are now in disarray. Free trade's proponents are in denial. They really think that free trade, alone, will guarantee prosperity. Without the variables I mentioned above being in good health, free trade merely insures that all participants face penury together. Australia got out of the Ottawa Agreement in 1930 just in time. 

Galieo's picture

Indians - just another kind of nigger.

Oh regional Indian's picture

Says a white slave....hah....

thebigunit's picture

Money is the life blood of capitalism.

Capitalism recognizes that money has a "time value". Capitalism is the management of the "time value of money".

Destroy the concept of money and you destroy capitalism.

Destroy capitalism and you destroy production, and 8 billion people go back to feeding themselves by foraging.

When humanity returns to foraging, dodo birds, spotted owns, whales and everything else that is edible are wiped out within days.

 

Snaffew's picture

8 billion people will never go back to anything.  The problem with human thought is they think of everything in recent timetables.  The global population has exploded from 2.5 billion in 1950 to well over 7.5 billion today.  Humans have added 5 billion consuming, polluting, destroying slobs to this planet in less than 70 years.  At this rate, the life expectancy of the human population is less than 100 years before critical mass is achieved.  Keep on chugging the "growth and capitalism" theme...it works really well for a few centuries until you reach these epic proportions.

oldschool's picture

It's easy to complain.  It's difficult to criticize.  If you don't like capitalism, what better alternative do you suggest? And while you're at it, perhaps you could try to explain why Modi's program is "capitalist," as opposed to, say, statist?

thebigunit's picture

The human population of earth 10,000 years ago ("Before Capitalism") was 25 million people.  That's probably all the "foragers" that the planet can support.

Destroy capitalism and 8 billion people starve.

How are your foraging skills?

bikerdude's picture

This post is a gross misrepresentation of the reality in India. Most people are happy the government is doing something really good for everybody. In fact, even the poor are supportive of the move even if they are the ones that have to endure the most. People are helping each other in lines and handing out tea for the ones stuck in the line for a long time. Its like the whole nation is coming together for a tea party. If anything its increasing the camaraderie and nationalism in the public in this fight against corruption. The corrupt people are running around in panic. What his post doesn't consider is that there have been waves of such moves before and these waves take out layers of corruption in India. There will be more such waves, increasingly harsh towards the corrupt. Everybody is in favour of the government and doing their part to contribute. Not to mention the long-term economic benefit this move brings from all the tax revenues and the re-capitalization of the banking sector.  They will reduce the interest rates to compensate for the short term pain to the economy. 

Come On Puu See's picture

IT'S "MALUS,"  THE GOVT TROLL GARBAGE, AGAIN. 

Arnie Fife's picture

When they can't get the food distributed from these farmers...Then mass starvation is right around the corner.

Mugabe comes to mind in Zaire.

This is no different than the environmental idiots in the United States trying to get rid of oil and Natural Gas.

Natural gas fertilizers feed one third of the worlds populations.

People end up starving because of stupid ideas being pushed by these lunatics...who haven't the faintest idea what their idiotic ideas and policies will do... to the average person in these countries.

Etteguj Guj's picture

Mugabe in Zaire? When did he move?

the.ghost.of.22wmr's picture
the.ghost.of.22wmr (not verified) Nov 25, 2016 5:53 PM

What's the current bodycount?

Malus's picture

Bullsh*t article. Modi didn't surprise his cabinet or the banksters with this. They are all in support of this. This demonizing one man (ruler) crap is disinfo. This has UN/IMF/World bankster written all over it and goes hand in hand with other countries demonizing cash from around the world. We don't accept a cashless society, they outlaw it and force it upon you at gunpoint (martial law). Welcome to the fake news NWO......

gdpetti's picture

Hard to tell, but like Erdo the Idiot in Turkey, Modi Modi is a loose cannon of crap unleashed on a mostly unsuspecting public... something tells me that not many will complain when 'God' takes them home for good.... cry me a river, but the Ganges knows how to take care of its own.

Come On Puu See's picture

CAN YOU BE ANYMORE TRANSPARENT, GOVT TROLL GARBAGE?! 

pitz's picture

Time to send India all of its talent back that's currently in the USA on the H-1B visa.  The country is in desperate need of its talent back so that problems like these don't rear their ugly heads again. 

HANGEMHIGHER's picture

One man dstroying so many, dimocracy my arse.

DirkDiggler11's picture

Bankers and Governments are ALWAYS EVIL. Hedge accordingly.

chairman mao's picture

Seems like all out wat with pakistan is on the horizon....

Korprit_Phlunkie's picture

Sadly, Americans are stupid enough to go for this in the near future. I tried to explain to a friend of mine this was coming and they actually welcomed it. They only used their debit card for all transactions and never carried cash. He was also in favor of unlimited government security measures "as long as he was safe on a plane" fucking moron. We are no longer friends.

mickeyman's picture

I remember something like this happening in Ghana in 1996 or 1997. There, the government wanted to issue a new higher-denomination bill to keep up with inflation, but the IMF insisted that they first had to withdraw from ciruclation an amount of currency in small bills equal to the amount they planned to issue. So for six months there was no inflation--if you were unlucky enough to have borrowed money for your business, you were paying 40% interest, and none of your customers had any cash.

That was the one time we saw real desperation on the streets of Accra.

In the small villages, things were a little better--the web of family relationships and connection to the farms and fisheries at least kept everyone fed. Not so in the capital.

shining one's picture

The entire world is going crazy. I fear the causes for a world war have never been so potent. At least we will finaly find out if there are some benevelent aliens watching over us or not.

DaveA's picture

Watch out Mr. Modi, if the police don't get paid, your "police state" will become "no state" very quickly!

Come On Puu See's picture

THIS MODI MOTHERFUCKER OBVIOUSLY AN ILLUMINATI GARBAGE EXECUTING A PLAN TO IMPLODE INDIA AND REDUCE ITS POPULATION. THAT IS WHY THERE WAS NO CONTINGENCY PLAN, NO PREPARATION, NO GRACE PERIOD TO EASE THE PEOPLE IN. A SOCIETY OF 1 BILLION PEOPLE NEED TIME TO CHANGE. NO! IT'S READY, SET, GO! 

katagorikal's picture

Why don't people just keep using the old notes? If everyone accepts them, it'll be fine. No need to put them in a bank, just keep them in circulation. Their mattresses have not suddenly become any less secure. All paper currencies are built on faith, so if enough people have faith in the old notes they can still be a viable currency.

overmedicatedundersexed's picture

do gooders ..lord protect us all..this is a story of .gov and power - the problem for the world is how to tax everything, and destroy anyone with eliminating their wealth by state action..we see how well a few bureaucrats in EU and in fact most western countries serve the people..and how these professional pols become wealthy on meager  government pay..seems there is a push for ridding the USA of $100 FRN'S ..for the very same reason..to limit crime..sure, we beleive that do we not?

brazilian's picture

One more event that proves that economics is the phoniest "science" ever invented, and that economists and bankers are the only two professions that have absolutely no social value!

cat writer's picture

I looked at Modi's image and thought that he is India's version of James "Whitey" Bulger.  (https://en.wikipedia.org/wiki/Whitey_Bulger)   Whitey is now a federal convict and Modi is... prime minister of India.  Impressive.

 

 

 

 

fiddy pence haff pound's picture

that's the message.

how to re-start the barter system.

Just read Adam Smith.

I was thinking that the most liquid asset would be cigarettes,

just like in prison

artichoke's picture

My friends in grad school who best understood microeconomics "from the ground up", in their bones, were the kids from India.  What we did as crazy theoretical exercises, they had actually seen in real life, for example when it takes both currency and ration coupons to acquire something, both act as money.  I guess that was an episode a while ago.

 

They're educating a new generation of economists, the smart kids who survive this episode.

onmail1's picture

Start a new currency in USA

Stop the  dollar 

then

US debt==0