India's Demonetization Debacle Highlights The Dangers Of Monetary Monopoly

Tyler Durden's picture

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

As longtime readers know, I believe we are at the beginning stages of what will be historical paradigm level change across the planet. We sit on the precipice of the self-destruction of almost all the dominant institutions we’ve been accustomed to throughout our lifetimes. To borrow a bit of played out and painfully clichéd Silicon Valley lingo, everything is on the table for “disruption.”

Naturally, this doesn’t necessarily mean the paradigm that follows the current one will be materially better, but I am personally optimistic about what will emerge following a period of considerable confusion, hardship and conflict. In order to tilt the scales toward a positive outcome, those of us who wish to usher in a world characterized  by human freedom, decentralization, self-government and kindness, need to recognize the most likely avenues we have to get there. Technology is obviously extremely important, as a recent move by Whisper Systems to thwart censorship demonstrates.

As Wired reported last week:

Any subversive software developer knows its app has truly caught on when repressive regimes around the world start to block it. Earlier this week the encryption app Signal, already a favorite within the security and cryptography community, unlocked that achievement. Now, it’s making its countermove in the cat-and-mouse game of online censorship.


On Wednesday, Open Whisper Systems, which created and maintains Signal, announced that it’s added a feature to its Android app that will allow it to sidestep censorship in Egypt and the United Arab Emirates, where it was blocked just days ago. Android users can simply update the app to gain unfettered access to the encryption tool, according to Open Whisper Systems founder Moxie Marlinspike, and an iOS version of the update is coming soon.


Signal’s new anti-censorship feature uses a trick called “domain fronting,” Marlinspike explains. A country like Egypt, with only a few small internet service providers tightly controlled by the government, can block any direct request to a service on its blacklist. But clever services can circumvent that censorship by hiding their traffic inside of encrypted connections to a major internet service, like the content delivery networks (CDNs) that host content closer to users to speed up their online experience—or in Signal’s case, Google’s App Engine platform, designed to host apps on Google’s servers.

It goes without saying how critical technology such as the above, combined with dedicated activists such as Moxie Marlinspike, will be to making the world a better place. Beyond that, we also need to understand what our adversaries will do. I define such adversaries as the defenders of the status quo, who will do whatever it takes to retain power and influence in the face of their increasing irrelevance. As it becomes more and more obvious to people that these legacy institutions have become so corrupt and bureaucratic that they do far more harm than good, their leaders are likely to resort to more and more authoritarian tactics in order to defend their untenable position. This is where we need to see opportunity as opposed to cowering in fear.

We are on the right side of history, while the old institutions are simply living on borrowed time. We must be smart about how we see the world and understand that Donald Trump is likely to react to such a situation quite similarly to a Barack Obama. Whoever’s in charge of the government will by definition work to preserve the power of government as opposed to the liberty of the citizenry. This goes for pretty much every political leader and government worldwide. As such, we must assume government will lash out in increasingly irrational and authoritarian ways in the coming years, as the old paradigm becomes unglued.

As I mentioned earlier, when a government reacts in an absurd and harmful way, we need to see this for the opportunity it presents as opposed to becoming overcome with fear concerning its inevitable near-term harm. A perfect example is the recent extremely destructive decision by Indian Prime Minister Narendra Modi to unilaterally scrap old 500 and 1,000 rupee notes, which merely represents a particularly egregious move within a broader push by elitist and status quo bureaucrats across the world to ban cash. As disruptive as this move has been, it also carries with it a significant silver lining. For example, it’s causing us to ask the really big questions we need to be asking.

As R. Jagannathan wrote earlier today in Swaraja Magazine, where he is the editorial director:

A philosophical question that economists need to answer after Lehman, zero-interest money, QEs, and demonetisation (in our case) is whether central banks ought to have that kind of monopoly over money.


Most free-market economists would agree that monopolies are bad, but they do not usually challenge the state’s monopoly over violence and law-making or the central banks’ monopoly over the issue and regulation of currency.


Leaving aside the state’s monopoly on some kinds of power, let’s ask whether a central bank’s money monopoly is worthwhile since it does not appear to have delivered the kind of benefits to the world in recent decades which can justify the conferment of a monopoly.


The fundamental reason why we have grown to love (or learned to live with) central banks is that we cannot remember a time when they did not exist. So the argument is better the devil you know…


But consider their track record…


The US Fed could not prevent or even moderate the 1930s depression. It took a world war to rescue the US economy from deflation.


The US government (and the Fed) reneged on their most important commitment – to link the dollar value to gold – in 1971. This link was crucial to getting the world to accept payment in US dollars. But once that got done, the US did not want to honour its commitment since this was costing it a bit. In short, central banks cannot always be trusted.


“Independent” central banks were never able to prevent governments from debasing the currency by resorting to huge fiscal deficits. So they could not maintain the exchange values of their currencies without creating hardships for their people.


Central banks have been particularly bad at predicting when money was too cheap or too expensive – the main job they are supposed to do – and we have seen that in bold relief post-Lehman, and with the ongoing Eurozone crisis and Japan’s never-ending stagflation.


In India, we were happy to assume that for Reserve Bank of India (RBI) governor Raghuram Rajan brought inflation down, but this is a story we concocted after noting that the man was talking a lot about inflation. We presumed that what he did must have helped inflation come down, but we can never be sure. But his predecessor D Subbarao spent five years chasing down both inflation and disinflation (pre-2008, post-2008, and post-2011-12) and was considered “behind the curve” on policy. As if one human being can predict the net outcomes from the individual actions of a billion-and-a-quarter people responding to inflation or deflation.


And now we have a new Governor, Urjit Patel, taking the flak for a decision he was only partially involved in – demonetisation.


But the real question to ask of Urjit Patel and the government that appointed him is not whether demonetisation was a good idea or whether it has been implemented badly, but whether either government or the central bank should have had this monopoly power at all?


That Patel and the Modi government are being attacked both by Left and Right for demonetisation leads us to a larger and more basic question: Could demonetisation have happened if the Indian state did not have a monopoly in central banking, and there were several money issuers vying for the citizen’s custom?


The answer is probably no, for it is only monopoly that assures central banks this kind of power. If India had another currency issuer, the RBI could not have demonetised the currency in one go. It would have had to announce a plan, and take the bad money out in stages.


But the central bank’s monopoly is really a consequence of the state’s monopoly on law-making and power. This is why states, despite being at odds with their central banks on the short-term direction of monetary policy, are equally keen to let them retain their money monopoly.


In the US, a private player launched a gold-based currency called e-Gold, but when it grew big enough, the powers-that-be had it wound up. Launched in 1996, e-Gold, founded by Douglas Jackson, allowed account-holders to make cash transfers to other e-Gold account-holders through its website. At its zenith, e-Gold was said to be handling more than $2 billion worth of annual transactions. (Read more about e-Gold here and here).


But governments can’t stand a rival who challenges their own right to mint currency, and so in 2009, e-Gold was shut down, ostensibly because it did not have a licence to transfer money. The Patriot Act, enacted after 9/11, gave the US government powers to do this.


The 21st century will challenge the idea of the state and its monopoly powers, but Step One in that process is whether central banks should have a monopoly on money.


The answer is no. Competition will be good even in the business of creating money and managing its ebbs and flows.

All of this reminds me of something I wrote recently with regard to the self-implosion of mainstream media in the post, ‘Then We Will Fight in the Shade’ – A Guide to Winning the Media Wars:

It is when you get desperate, scared and panicky that you make the biggest mistakes, and the legacy media is currently desperate, scared and panicky.  As Napoleon Bonaparte allegedly said:


“Never interrupt your enemy when he is making a mistake.”


We mustn’t get in the way of the legacy media’s inevitable self-destruction. Part of this means that we do not self-destruct in the process. We need to recognize that there’s a reason independent, alternative media is winning the battle of ideas in the first place. For all the warts, mistakes and bad actors, the emergence of the internet is indeed the historical equivalent of the invention of the printing press on steroids.

The same mindset and strategy should be applied to the state as well. One thing I’m relatively certain of, is that as economies continue to decay under the weight of the status quo way of doing things, the incredibly corrupt men and women in charge of our dominant institutions will flail from one destructive, authoritarian action to the next. We must expect this and prepare to respond.

Technology will do its part by providing the necessary tools to transition from one paradigm to the other, but equally important will be winning the narrative when it comes to the 7 billion people inhabiting the planet. This is where websites such as Liberty Blitzkrieg and others will play an increasingly significant role in pointing out and articulating the harmful, irrational and destructive nature of the status quo response to challenges that arise. In this way, we can be sure to win the battle of ideas, which will be crucial to successfully ushering in a new age of human freedom, creativity, opportunity and progress.

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Dilluminati's picture

Don't you just hate it when paper money is just worth toilet paper..

bet people glad they got them some gold..

wonder what spot gold is at in india?

J S Bach's picture

Cashless, bitcoin, fiat, it's all a scam.  Money is money.  It carries its inherent value within itself.  If you're going to use a paper currency, it has to carry with it the promise to redeem its "worth" in something of tangible value (gold, silver, whatever).  Anything else is based on human trust - and we all know how reliable THAT is.

effendi's picture

With respect to you I must say BULL! Any promise to redeem printed on paper is only as good as the solvency and character of those making the promise. Look at silver certificates in America, or 10 shilling notes here in Australia, they promised the bearer that they were payable on demand yet they were never honoured once the government decided not to honour them. If governments have already shown how they failed to honour promises in the past then how do you expect them to honour them in the future?

rejected's picture

Yes, governments always fail to honor promises, but the lemmings still fight wars and die to presere them.

Figure that one out!

J S Bach's picture

effendi... you and I are on the same page.  YES... "paper is only as good as the solvency and character of those making the promise."  This is exactly what I mean by the word, "trust".  Get it?  Nixon took us off of this "redeemable in gold" standard in 1971.  That's when the more recent "trust" in our monetary overlords began to fade.  This is a game they've played for centuries... each time amassing more and more material wealth during the "resets".  It's about time, we the sheeple, begin to recognize who these scam artists are... what they have stolen from us... and what their ultimate sentence must be.  Get it?

Herd Redirection Committee's picture

Nixon Shock came about 2 weeks after Apollo 15!   LOL.

You know, the one with the magic Moon Buggy, that unfolded and assembled all by itself.

You want to see some trippy early 1970s cutting edge SFX work by Douglas Trumbull (directed by Stanley Kubrick) I suggest you watch the 'first person' footage of the Lunar Rover traversing the 'lunar landscape'!

Fucking Nixon.

On another note, if we can only educate the public on THREE financial mechanisms of control, surely those three must be: usury, fractional reserve banking, and fiat currency.

Golden Phoenix's picture

Yep, same problem as amending the Constitution. If they don't bother honoring obligations now they won't later either.

Hail Spode's picture

I agree that whatever is used as money should be something that would have value even if it were not used as money. I.E. gold and silver is superior to bitcoin. The issue of redemption is only a problem when the government itself issue money, or central banks connected to it issue currency. If the government was only an enforcer of contracts, rather than a party to a contract, then it would be much more likely to use justice and equity as regards to punishing those who do not honor promises of redemption of paper for physical. When they are the ones making these promises, not so much....... 


Money is central to decentralizing government and decentralizing government is essential to freedom. For the rest of the story about how government is centralized and what we should do to stop it......

The central planners's picture

India facing huge economic crisis, people is bartering rice in other to get stuff and look at this:

sarz's picture

Modi and his friends have a virtual media monopoly in India, and it looks like the same money finances an army of Hindutva trolls worldwide. 

native grunt's picture

You can usually tell its the Hindutva buggers, since

a) they hardly grapple with the arguments,

b) repeatedly span the posts with uninteresting links,

c) resort to name calling and question the poster's intelligence,

d) and if this was an Indian forum suggest that those who disagree can f**ck off to Pakistan.

RedRaisinHell's picture

people are NOT happy with demonetisation. EVeryday there are 10s of forwards clogging emails and messages on whatsapp making fun of modi and demonetisation.

Mustafa Kemal's picture

"Sputiknews? is our source now?"

Huffington Post? is our source now?

Huffingtong Post has a whole section on Fake News, and here

you will find an article on

How To Recognize A Fake News Story

In particular, it says

2. Check What News Outlet Published It
Nobodys Home's picture

Over the course of a year I've converted some of that paper money into actual toilet paper. Charmin clean-care. Excellent stuff! I recommend it to all ZHrs. Try it.
I've stashed about a year and a half of tp. When we tank our currency, at least I'll have a form of paper that does more than smear shit around.

cool_guy's picture

In India the people who have lots of money are mostly crony capitalists, politicians, middlemen, lobbyists...common people barely survive on $200-500/month and poor on $50-100/month.

The untaxed wealth of these crony capitalists has been made toilet paper by the nationalist govt...People are very happy. Poll after poll is showing that. The authors in the west are getting news from the establishment media that is spreading misinformation


The ruling party is sweeping elections after demonitization


sarz's picture

While everyone is distracted with the chaos of demonetisation, Modi and gang have quietly forgiven their favourite business cronies billions in bad loans.

Modi's party is winning some elections such as the municipal polls in Chandigarh. Hard to say what this means. Partly, a functionally illiterate middle class is convinced by a media monopoly that this is a sacrifice to fight corruption.

We'll see what happens when farmers are wiped out, having missed the whole planting season for lack of cash. I did meet a woman who owns a small grocery shop who was delighted that her debtors, flush with the old currency, paid her off. 

Koba the Dread's picture

You ask "Don't you just hate it when paper money is just worth toilet paper." That may well depend on whether you need toilet paper at that moment and how desparately you need toilet paper at that moment. It also depends on how willing you are to deface the hostess' bathroom curtains.

To answer your question about spot gold prices in India today: $1,458 per oz. + 30 days in the electric chair.

ebworthen's picture

"Transition" and "no cash" don't mix.

Let's see how that all works out, eh?

Dilluminati's picture

I just hate the unrepentant globalist crooks

I hate banksters and all they stand for

theft from the honest and the poor

cool_guy's picture

Agree with you India under the nationalist govt headed by a low caste tea selling commoner.. theft is taking place from globalist crooks, give back the money owed to the common man!


87% People support it

RedRaisinHell's picture

Are you stupid? Modi just stole 14.5 Lakh crore from the people in cash to give to the globalists. Tea seller background is just nonsense, he is a college educated man.

cool_guy's picture

Lol!..How did he steal 14.5 lakh crore? The currency was replaced one for one and not stolen and how did he give it to globalists?......

What are you drinking these days?...Lol! or have the globalists paid you to be here..or are you hurting because you stole the blood money that belonged to the poor!

Clock Crasher's picture

Cast system + 4th world + demonitization = A failed state

Clock Crasher's picture

This just in.  Wages fell 10 cents to 10 cents in the geographic region formerly known as India.

We Are The Priests's picture

"This is where websites such as Liberty Blitzkrieg and others will play an increasingly significant role in pointing out and articulating the harmful, irrational and destructive nature of the status quo response to challenges that arise."

Nothing like a little self-aggrandizement.  Let's not forget that the "alternative" that replaces the status quo eventualy becomes itself the status quo.

DarkPurpleHaze's picture

You might as well remove the "I" in the BRICS bank pipe dream....and maybe the "B" as well.

The "S" is more or less irrelevant. The "R" can't take up the slack of B, I or S and "C's" yuan and bond market is weakening as we speak.

Other than that, the BRICS narrative is on track, right?

cool_guy's picture

Not so soon. The "I" is seeng inflation decreasing from 7% to 2%, GDP growth is intact (may have a small dent this quarter), GST Tax reform will boost growth.......Indian Ruppee has not collapsed one bit despite all currenices falling against the might dollar......B, R C, S are all suffering...while I is intact and doing well.....

rejected's picture

Not mentioned, ( as usual ) Liberty dollar was also very successful. Government shut it down, Called the owner a monetary terrorist and convicted him of counterfeiting because his coins were round and Americans were too stupid to differentiate.  And not one alternative gold / silver site or those who constantly holler for a return to metals currency attempted to help. It was a sad thing to see. Mr. NotHaus minted a coin in the image of a very popular ex representative. That representative was and still does call for competing currencies. He repaid Mr. NotHaus by ignoring the despicable episode altogether. I'll let the reader guess who that back stabbing representative was. One thing for certain though, Americans love the trash they call money.

LibertarianMenace's picture

Pretty obvious the wizards behind the curtain abhor competition. As he was "making, possessing, and selling his own currency" he should have been celebrated, not jailed. But of course, we live in a free country. 

elmo jones's picture
The problem seems to start here. Matt. 13.12 Whoever has will be given more, and they will have an abundance. Whoever does not have, even what they have will be taken from them.
HRH Feant's picture
HRH Feant (not verified) Dec 26, 2016 10:54 PM

Some of us will fight in the shade. Love the new app / countermove. Will it work? Would you risk your life to use it? That is the question. Maybe. Maybe not.

East Indian's picture

Like I said earlier. 


The greatest question before our times is "In an economy, who should have the power to create money, and how much money should be created"...


The question before the 20th Century economists was, "If the medium of exchange and storage of value should be one and the same?". The answer was "No". And thus ended the god standard, a commodity backed money. 

moneylover3's picture

Another Demonetisation anti-Indian article,sigh

Tyler's are supporting the corrupts & money-launderers

Hey tyler's have you sold your soul to gayros already?

TSK TSK sharing articles for just $0.02...

cool_guy's picture

It's a combination of misinformation by globalists on Modi and cultural difference in understanding between a free America slowly coming udner the grips of the estabaishment (for last 25 yrs) and India that ruled by establishment and stooges of globalist for 67 yrs and has just started to rebel........

RedRaisinHell's picture

Modi is a globalist puppet just like CONgress and other opposition parties. 

mountain99889's picture
mountain99889 (not verified) Dec 26, 2016 11:12 PM

india premier Modi is rabidly pro-Israel - (he's a Jew puppet)

ZD1's picture


He's a devout Hindu and will never be a Jewish puppet.

cool_guy's picture

Yup. Modi was never puppet of anyone. He maintains friendship with everyone to benefit's called diplomacy.

sarz's picture

If only. He's simply too small a man to get things right, with Pakistan in particular. Partly it's because his reading of Hinduism, along with that of his RSS mentors, is based on unshakeable if ultimately incomprehensible feelings of inferiority. 

mountain99889's picture
mountain99889 (not verified) cool_guy Dec 27, 2016 9:34 AM

all the zionists on zh defending Modi

sarz's picture

He's a complete egomaniac and bully. There's no room for devout, except maybe self-worship. 

As for Jewish puppet, every government after Rajiv Gandhi has been sucking up to Israel for foolishly misconceived geopolitical reasons. Far worse is the quiet and total subservience to the Jewish money power of the City of London and Wall Street. That's also not new with Modi, only more extreme. 

BeyondTheSky's picture

True. Indira and Rajiv Gandhi were assassinated by Zionist CIA and Mossad backed rebel groups. After their death there was no resistance to Zionist control on india. Modi is a wilful complete puppet of British deep state - CIA - Rothschild.

Koba the Dread's picture

Modi is not pro-Israel, rabidly or otherwise. He is, however, rabidly anti-Muslim and shares that bond with Zionism.

mountain99889's picture
mountain99889 (not verified) Koba the Dread Dec 27, 2016 6:20 AM

you should not tell easily disproven lies

native grunt's picture

Modi would have sucked up even more to the Israelis since he is basically an ignorant person, had it not been pointed outed to him that India depends on the Arabs and Iranians for both oil and jobs. This is why we no longer hear of the eternal fealty between the Jews and Hindus, that was current when this bunch of idiots were in opposition.

Kirk2NCC1701's picture

How about them BRICS?

Moar and more BRICS falling out of the wall.

RedRaisinHell's picture

More like hammered out of the wall.