"Demonetization Has Achieved Nothing" - India's Rapidly Plunging Toward A Police State

Tyler Durden's picture

Submitted by Jayant Bhandari via Acting-Man.com,

India’s Currency Ban – Part VI

India’s Prime Minister, Narendra Modi, announced on 8th November 2016 that Rs 500 (~$7.50) and Rs 1,000 (~$15) banknotes would no longer be legal tender. Linked are Part-I, Part-II, Part-III, Part-IV, and Part-V, which provide updates on the demonetization saga and how Modi is acting as a catalyst to hasten the rapid degradation of India and what remains of its institutions.


There are undoubtedly many differences between the two gentlemen depicted above, but both appear to have mastered the age-old trick of extending one’s grip on political power by inflicting chaos.


As the deadline of 31st December 2016 approaches, Gresham’s law has been turned upside down. When they needed to be converted, the banned currency notes were trading for a 20% discount to their face value. In the meantime, the discount has disappeared and the banned notes are trading at a premium of 10%. The mafia which deals in the banned notes could not possibly be happier — it promises to be a big supporter of Modi going forward.


See if you can spot a rich person here. Rich and connected people, if they really needed to exchange banknotes, used the mafia (which employed millions of poor people to queue at banks), police (who used ID copies of old prisoners) or banks (who simply swapped the currency notes). It is the desperately poor people who have suffered.


As you read this, keep in mind that India’s GDP per capita is $1,718. When the quarter of relatively higher-earning Indians is segregated from the population of 1.34 billion, one realizes that more than a billion people — who are among the world’s poorest and most wretched — exist in appalling conditions.

These people, who earn a dollar or two a day, are now expected to use electronic media for transactions, in an economy in which electricity and the internet are unpredictable even in big cities. With no money to buy seeds or any opportunities to earn even $2 a day given the cash crunch suffered by potential employers, these hungry and desperate people are queuing up outside banks.

India has no intellectual backbone, with its middle class — in what is still an entrenched caste system — unconcerned about the man-made crisis that has hit this large number of desperately poor people.


Indians have mostly taken their troubles in stride. The international media have seen this as a sign of perseverance and a deep desire among the poorest to bring about positive fundamental change in society. In reality, the lack of protests is mostly indicative of Indians’ lack of moral instincts, a common problem with irrational societies.


Demonetization will have achieved nothing positive. But it will have seriously damaged the Indian economy. The human costs are immense and continue to pile up. This could easily — even likely — take India to autocracy and eventually, bloody and chaotic disintegration.

The demonetization policy and Modi are merely symptoms of deeper issues though. Our job must be to draw out the underlying principles in order to be able to project what might unfold in the future.


Rationality is Needed to Build and Maintain Rational Institutions

India’s political institutions and big organizations were built by the British. They have crumbled — slowly but surely — since the British left in 1947. These institutions would only have been sustainable if society at large had at best become as inclined toward critical thinking and rationality as Britain was, or at worst, if the British had continued to run the institutions. With neither being the case, the glue has come unstuck.

Over the last 300 – 400 years, the West has disseminated its technology, institutions, etc., hoping that these would provide the tools to undo tribalism, superstition and irrationality and promote critical thinking instead. Africa, the Middle East and South Asia were offered intellectual products developed in Europe over a period of 2,500 years on a platter, the finest achievements of humanity, free of charge. However, to the people on the receiving end, the plate appeared to be completely empty.

What did appear to work was the focus on trade pursued by the East India Company, and the attempt by Catholic missionaries to bring about cultural change from the bottom-up. Neither of these approaches had a chance to fully play out, and the British government took over India in 1858.

The cultural renaissance that had begun to happen in India started getting politicized and came to an abrupt halt with the death of Nobel laureate Rabindranath Tagore. The cultural renaissance had slowly ossified into the so-called independence movement. Everything took a nosedive after the British left, and continues to deteriorate today.


Mahad: The remaining portion of Mahad-Poladpur bridge which was washed away in flood water of Savitri river on the Mumbai-Goa highway in Raigad district

A British-era highway bridge in India collapsed in August 2016, killing 29 people. Amusingly the UK — even though it left India 70 years ago — maintains a database of the bridges it left behind. A few years ago, the UK alerted the Indian government that the bridge had outlived its useful life. Naturally, this alert was ignored.

Photo credit: PTI


The Pace of Institutional Decay is Picking Up

Imparting the concept of reason may look like a simple job of education to the western mind, but it has not happened and proved impossible. India (and many similar countries) did import western medicine, food, clothing, music, movies, Paris Hilton and Kim Kardashian, but completely ignored — actually failed to see — what the cornerstone of Western civilization really consists of.

When the internet brought societies closer, it was far easier to import the entertainment aspect,which is to say the high time-preference aspects of western society. The recipients perceived the facade — clothing, music, Ray-Ban sunglasses, etc. — to be what made the West so successful. They simply did not have the capacity to recognize that it was the concept of reason that made Western civilization successful.

Moreover, the free gift of technology that India received and the economic growth it promoted, has disincentivized Indians from becoming rational or virtuous. Worse, it has made educated middle class Indians extremely arrogant. The importation of western entertainment products without the constraints of rationality has led to a skyrocketing of disease, pollution, chaos, abuses and stress in India.

I thought initially that ritualistic religion would fall, in view of easy access to knowledge and information. Alas, modern technology and forced education are a heavy burden for irrational minds, and exist as mere beliefs if they are not underpinned by critical thinking.

Ritualistic religion is experiencing a significant upswing. An aggressive, nationalistic version of Hinduism — Hindutava — is spreading rapidly. India is increasingly similar to the Middle East in this respect. The institutions left by the British are in the process of mutating to accommodate the India’s underlying culture.


One Day, Even the Facade Must Vanish

Will there be democratic elections again anytime soon? If Modi loses his support, possibly not. All signs show that Modi is strengthening his position as a de facto autocrat, likely imagining himself as a kind of modern age Hitler. All his potential challengers have been sidelined.

But Indians are not Germans. India’s chaos, infighting, indiscipline and backbiting mean that no autocrat can become a copy of Hitler. One should rather be looking at Zimbabwe or Uganda for useful analogues. Modi will eventually get washed away in the chaos of India. But as India’s institutions crumble, whoever comes after Modi — perhaps a military general — will be worse.

We must regard Modi’s demonetization decree as a symptom of deeper issues at play, in order to see the direction that India has embarked on, which is not dissimilar from what is happening in much of the rest of South Asia, the Middle East, Africa, and large parts of South America.


All these people are all suffering, but they end up fighting each other while queuing up outside the banks. They fail to understand the chain of causality, and cannot see that it is Modi who is behind their predicament and anger. They have fallen for a divide-and-rule stratagem.


Is Modi Losing Support?

Modi enjoys very strong support from non-resident Indians (NRIs). In the past Indians living in the UK and the US were often asked about snake-charmers, cows and elephants on the streets of India. At one point India briefly came to be seen as the rape-capital of the world, after a number of rapes cases got international exposure.

Being tribal, NRIs could not detach themselves from what was happening in India, and felt a deep need to change perceptions about the country. In the eyes of NRIs, Modi has put India on the international map, making it look modern and progressive.

While most people around the world don’t really care about the economic non-entity of India, Modi convinced NRIs that Obama and Putin were dreaming of Modi every night. Modi gave these self-confidence-lacking NRIs vicarious confidence in their place of origin. NRIs support Modi for the emotional crutches he offers them, not because they really care for India.

Members of India’s middle class love to copy NRIs, to make sure they come across as modern and cool. On top of this, Indians have for a long time craved a strong, firm leader, someone to relieve them of self-responsibility. Modi’s huge backing among members of the salaried middle class remains firmly in place.


Dire Economic Consequences

Withholding tax is automatically deducted from the wages of members of the salaried middle class. Since they have as a rule never run a businesses, they often feel that businessmen have got a very rosy deal somehow, suspecting them of managing to manipulate their accounts to avoid paying taxes.

Instead of asking for lower taxes or becoming entrepreneurs themselves, salaried middle class members have chosen envy, insisting that those who they suspect of minimizing their tax payments should pay their “fair share”.

The middle class doesn’t see itself as suffering any disadvantages as a result of the demonetization decree, because the burden is mainly borne by the poorest people and small businesses. Given the entrenched caste system, the former are not perceived as human beings, while envy takes care of the latter.

In reality, small businessmen are the heroes of India though. They are struggling under a massive and rapacious bureaucracy. Over the past three years, additional taxes have been imposed on them and the regulatory burden has steadily increased.

Virtually every businessman I have met since the start of demonetization on November 8 2016 has told me that revenues are down by as much as 80%. Entrepreneurs were already reeling under very difficult circumstances, but now many are going bankrupt.


The sugar industry is under great pressure. Demonetization has turned what was expected to be quite a good year into a year of vast losses.


Many small businesses are facing closure and bankruptcy – in Moradabad, an estimated 60% of the artisans normally thronging the streets have disappaered. Soon these people will not even have money for food.


Coconut farmers are suffering as the dearth of currency has led to a collapse in prices.


With businesses failing, poor people are quickly losing their jobs. Migrant laborers from across the country no longer find employment and often don’t get paid what they are already owed.


Food prices are down by as much as 25% to 50%. This has hugely benefited the middle class for the time being. Alas, this fall in price is not due to excess supply, but due to a fall in demand, as poor people are struggling. Farmers are suffering severe financial problems, which will end up having serious effects on food prices in the next cycle.

When members of the middle class oppose corruption, it does not mean that they do not take and offer bribes — irrational people can happily exist with this cognitive dissonance. Particularly those working for the government are often extraordinarily corrupt. They want corruption to end, but want themselves to be exempted.

Virtually all Indians are offering and taking bribes. When they voice their views on corruption, one must interrogate them a bit and probe more deeply in order to understand what they really mean when they say they are opposed to corruption.


Long queues continue to form, with people arriving very early in the morning, hoping to get at least some cash.

Photo credit: PTI

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VonPumperDic's picture


But...But...they made the Banksters real happy !......

Jeffersonian Liberal's picture

Quick question.

Does anyone really believe that the goal of a "cashless society" is to increase prosperity and liberty?

That is not the goal.

The development of the police state is not an unintended consequence of the war on cash and gold.

The war on cash and gold (and barter, eventually) is to aid the growth of the police state and to ensure its stranglehold over the populace.

J S Bach's picture

FDR - 1933 - Confiscate (ban) gold and then revalue it upward around 75%.  Pure theft.  Poor suffer through 6 more years of Great Depression.

Modi - 2016 - Confiscate (ban) banknotes. "When they needed to be converted, the banned currency notes were trading for a 20% discount to their face value. In the meantime, the discount has disappeared and the banned notes are trading at a premium of 10%."  Poor suffer through __ more years of misery.

The more things change, the more they stay the same.

Luc X. Ifer's picture

The purpose of a cashless society is to strictly rationalize and strictly control access to resources.

BennyBoy's picture


First Demonetization.

Then Demonization.

Transformer's picture

Someone needs to say it.  This looks like genocide, plain and simple.

eforce's picture

Perhaps they need the British to restore order again.

tricorn teacup's picture

British rule was not without drawbacks, but for many former colonies it was a high water mark of good governance.  But Great Britain itself has much fallen from those days, in ways far beyond loss of territory.

Jeffersonian Liberal's picture

The Fascists were actually the most evolved and intellectual of the totalitarians.

The communists/Bolsheviks simply took ownership of everything and controlled the people by aiming a gun at them. That doesn't work because eventually people become so dispirited and enslaved that they prefer oppression and misery to contributing to that State.

The socialists simply try to tax the producers to fund a welfare state. But eventually, the producers tire of seeing their earnings being stolen and given to the parasite class, they see the parasite class grow in size until the tax burden becomes punitive and destructive, and more and more of the productive class cross over to the parasite class (not all willingly) until the parasite class sucks all the blood out of the producers and the system collapses.

The Fascists, like the communists and socialists, have the same goal: totalitarianism. But their approach was to identify the major industries that control the people and then to appoint a selected corporation from each of those industries to oversee those industries as quasi-GSE entities. The State then only needs to collude with those chosen corporations and to drive their dictates downward and outward to control the people.

The industries the State has historically been most intent on controlling (in order to control the population) include:
* Transportation
* Education
* Energy
* Religion (in Western civilization, this resulted in the socialist subversion of the theological seminaries and the propagandizing of the pulpit)
* Communication (media, news, entertainment)
* Food production
* Health care (even Lenin said, "Socialized medicine is the keystone to the arch of the of the socialist State), meaning if the State controls medicine and healthcare -- that is, if you hang sickness, disease, ill health and suffering and death over the people, they'll submit completely)
* Currency and monetary policy (up until now, controlling the currency controlled the economy and controlled the politicians and enriched and empowered a private cartel of international banks. However, switching to a cashless society will be the last brick in the wall of the Statist's concentration camp.)

tricorn teacup's picture

At which point the "private" institutions colluding with government become indistinguishable from arms of government.

Liberty2012's picture

Outstanding comments on this thread - Thank you everyone!

eforce's picture

The problem with Fascism like all other forms of government bar monarchy is that it still has to "justify" its existence which generally results in a huge debt being built up and then it either collapses or starts a war to try and delay the inevitability of the former.

August's picture

The wretched poor of India have no one to blame but themselves, in their own past lives.  Karma, it seems, really IS a bitch. 

Perhaps, after 50,000 or so lifetimes, they will advance to high-level positions with the IMF or the BIS, like unto Gods.

Liberty2012's picture

The downvotes have no sense of humor.

Then again, perhaps some things are too serious to laugh about?

Probably not. Life is meaningless otherwise.

silverer's picture

Well, now we know his "modi-operandi".

Spigot's picture

One thing this cash ban did was to reduce the gold purchases of most Indians, increase the gold price to those who could arrange smuggling (40% over spot) and thereby enable to elites of India the chance to buy a lot more physical gold in the asian physical markets than if they had to compete with the average Indian for the same physical. You can expect that this cash ban will be reversed and that physical gold demand will explode in India which will further spike the physical gold price in asia, which will further pump physical from the west to the east. Nothing is as it seems. Someone has been attempting to prevent gold and silver from flowing to India. I wonder why???

Last of the Middle Class's picture

Someone somewhere would rather they barter in shiny objects nad live in caves or use digital fiat that is taxed every time it moves with a percentage always going to the digital currency gods. Nice to watch the experiment from afar before it comes to the US. Hope they factor in guns, lots and lots of guns in the US before they try that shit.

Txpl9421's picture

Imagine that line. 

Now imagine Americans standing in those lines.

Now imagine Americans standing in those lines with guns.

RedDwarf's picture

If this was tried in the USA the American Revolution 2.0 would already be in full swing, if not outright over.

In any event, unlikely it would actually get to the point it has in India in the USA, the political pressures against a policy like this would have been too large.

Cynicles's picture

the sheeple [liberals] are easily manipulated en masse

RedDwarf's picture

The majority is not actually what matters.  What matters is what the most radical 3% of a society is willing to do.

NumNutt's picture

Sad to say it but I make a lot of money in the electronic transaction industry, I have been in the industry for over 20 years now, and I can tell you for a fact that the end game has always been to become a cashless society. That was twenty years in in the making, they dreamed of it back then. You have to realize when you do a cashless transaction there are a lot of organizatoins that get a slice of that action, and it is not limited to your bank, the state government, the federal government, the association (visa, Mastercard, etc...), the processor (First Data, Tsys, etc), the communications company (Pheonix, etc...), and the telco's. so all these groups are hell bent on getting a slice of the pie everytime you tip a waiter, buy a soda, a pack of cigs, make a drug deal, pay the plumber under the table, they want some of the action.

Colonel's picture

So you work for the empire, thanks for the inside scoop. Time for a Star Wars quote...https://www.youtube.com/watch?v=-wntX-a3jSY

NumNutt's picture

Hmmm, I appreciate the Star Wars quote, but my only worry is the fact that the very next seen is poor old Alderan being reduced to a asteriod field, could that be our future?

Liberty2012's picture

Thank you Txpl9421 - your comment is encouraging.

Americans embrace the seeming contradiction of being both fiercely independent and adamantly cooperative.

The definition of free trade.

Calculus99's picture

Don't get me wrong, I like India, very interesting place. But its cities are complete shitholes.

Look at the last photo, you'd think that was taken in some hell-hole slum, but I'm not kidding, many of the best streets in the best areas look like that.

americanreality's picture

"If I had to go to India, I wouldn't go to the bathroom the entire trip."

Dg4884's picture

If you ate there, that's the only room you would be in!

38BWD22's picture




We were there a bit over  a year ago.  If you go to India for more than a week, you will likely get sick!

Parth's picture

JUst don't fart  on the plane back, it might just blow up. lol1

Parth's picture

Comeback#2,  Wear super diapers. Nobody visits India and does not go to the loo. LOL. ALso have a Guiness book rep with you.

Blankone's picture

I forget the percentages but I was surprised when I read the high percentage of people in India who live without a bathroom. Not even a proper outhouse.

Everyone remember the meme about how the powerhouse union called the BRIC's were going to take over and dominate as the new powerhouse. How has that turned out so far?

Food Loaf Junkie's picture

+100 for the George Costanza reference.

Hamm Jamm's picture

have you been to new york city ?  not far off

Falconsixone's picture

Took them off the land. Made money the god then pulled the money. Go watch your free tv and talk on your iphone. Your going to have to work harder and here's the new money based on government wants which is all that gold. China same thing. Moneys really handy for army food and bombs. It's a great way of life and death.

Fred C Dobbs's picture

Modi did not do this on his own.  I don't know if the author understands that. 

Skateboarder's picture

I was explaining this today in person. He reads the script just as Obie does.

Search for the term "cashless" and it does not occur in the article once. Just what does Bhandari think this is? It's a push for a cashless system in full force. I was in Mumbai all of last week - every bus stand had a PayTm or some other bullshit cashless advertisement. "THE FUTURE IS CASHLESS," plastered all over in advertisements.

The Demon-etization of 500 and 1000, introduction of 2000 without a new 500, and a mere 25% re-injection of currency... all the while this glorious company called PayTm was READY, bang-on READY to handle massive surges in users... what the fuck does it look like to you?


Look at the timeline. Alibaba and ICICI made their investments this March. No fucking way a company is able to handle a surge in traffic and users, especially that of financial nature, without stress tests spanning at least a couple of months. These fuckers were ready, enabled, and had the advertising plan way ahead of time.

We still have eyes and ears, you cunts, and our brains still work. Black money my ass.

Colonel's picture

 "Black money my ass."

T.h.e.y got ALOT of Indians believing that shit

Sisyphus's picture

Thank you for pointing this out. Black money is a ruse, the real intentions are hidden. They booted out Rajan for this reason, too. Now, they have a stooge in Urjit Patel, another Gujju. The authoritarians want to do two things--make Aadhar mandatory (biometric tracking) and go cashless. They will try to push Aadhar by tieing subsidies to it and cashless India will be pursued by doling out freebies.

This is an RSS agenda. Next, they will go after "benami" properties and finally it will be gold and silver. And 90% of the useless idiots will willingly walk to the slaughterhouse.

"Voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same way in any country.”
– Hermann Goering (as told to Gustav Gilbert during the Nuremberg trials)
Blame everything on Pakistan, take away the liberties of the people and turn the country into a police state.

By the way, PayTM has Chinese ownership.

leoking's picture

Funny your whole argument can be flushed down the toliet with just one news. 

Paytm (India) faces service outage due to sudden jump in number of users



Several Global compnies have annouced heavy investments in India due to growth oppurtunities ( same thing they did in China years ago) ... PayTm and others were ready due to 1) growing mobile phone usage 2) growing risk of carrying cash in some cities 3) Govt. support for digitalization which was public info a while back. Regardless what i say .. it wont convince you so go back to your basement n read some more conspiracy theories.. 

kellys_eye's picture

...is his middle name 'Soros' by any chance...?

Hamm Jamm's picture

no doubt that sack of shit had his hand in it

may he rot in hell

cashtoash's picture

The small business owners author calls heroes, have been doing booming business, make huge income, use all the available infrastructure-as lousy as it may be, but they have paid ZERO tax over their lifetime. They own properties, and hoard cash to avoid taxes.  Demonitization was meant to pull out cash notes stacked in their homes. Peole have literally dozons and dozons of boxes/suitcases full of cash at home and it has to be cash because depositing in banks alerts tax authorities. Unless business owners learn to pay taxes on income, whatever the fair amount, chaos will continue and eventually their cash hoards will be pulled out by military

effendi's picture

There is no such fucking thing as a Fair Amount of tax. May as well say there is a Fair Amount of protection money. Many also don't need to have boxes and boxes of cash if they have foreign hard currency, or better yet GOLD. Plenty of countries have ruined their local currency and now the locals prefer USD/Gold. Zimbabwe and Venezuela are the final destination of all fiat currencies and India has just moved on the fast track to that final destination.

bahaar's picture

Why don't you take a box of gold and move to Somalia.  No government or tax there.  see how long you survive.

leoking's picture

well said! these guys are full of talk about anti- this , anti-that but want the full benifits from the system

PTR's picture

"Pay taxes"

You realize that taxes are extorted from the populace under threat right?  It'd be like the neighborhood scumbag threatening to break your legs if you don't let him take your daughter out on a date once a week.