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Will India Implement The First "Executive Order 6102" Of The 21st Century?

Tyler Durden's picture




 

Something strange has been happening in India in the last year: while the rest of the "developed" world has been doing all in its power to crush its currency in order to promote exports within a globalist mercantilist system suddenly gone haywire, India has had the opposite problem: with its economy slowing down even as rampant inflation persists, its currency has been sliding against all other currencies. But probably more importantly: plunging against gold, as can be seen on the chart enclosed.

It appears that finally after months of "being long of Gold in Indian Rupee terms" having proven to be quite a resilient and profitable strategy, the Indian state has also figured it out. And they are unhappy. Because to them, the key reason for the rupee weakness has nothing to do with the actual economy, and all to do with the Indian population trying to protect against currency debasement coupled with inflation: i.e., purchasing gold. And they will no longer allow it.

From The Business Standard of India

The Reserve Bank of India (RBI) is likely to clamp down on gold coin sales by banks, amid rising bullion imports adding pressure to the current account deficit and weakening the rupee.

 

The Banking Regulation Act does not allow banks to trade in commodities and they play the role of a financial intermediary. This norm was relaxed in the pre-2008 era when the country saw a dollar influx that resulted in a sharp appreciation of the rupee. To sterilise dollar inflows, banks were allowed to sell gold, as they imported the yellow metal. The measure was temporary.

 

Banks were allowed to sell gold by importing it to fight the excess dollar flows. By the same logic, the measure should be reversed now as we are at the opposite end of the spectrum. It was a temporary measure, which unfortunately was made permanent by banks,” a top RBI official said.

 

The rupee has depreciated 30 per cent since August amid the sovereign debt crisis in the euro zone, which made investors flee to safer havens. Weakening macroeconomic fundamentals like the fiscal and the current account deficit have resulted in investors pulling out from the Indian market.

 

In its recent interactions with bankers, the central bank sounded its discomfort over the practice of banks pushing gold coin sales and asked them to go slow. However, banks have not stopped the practice of incentivising their staff to push gold sales, as they earn a margin of Rs 100-150 per gramme of gold sold.

Sadly, India's reaction which does nothing to address the actual source of the economic malaise will backfire, as acts of economic desperation always do. However, the next step will be even sadder, and one known rather well to most American alive between the two world wars: the first instance of Executive Order 6102 in the 21st century. Because again, he who defects first from a regime that pretends to allow fair price discovery of currency substitutes, defects best.

 

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Wed, 06/27/2012 - 18:53 | 2566735 Creepy Lurker
Creepy Lurker's picture

"So slap the State in the face with a fist full of spinach"

LOL! That made my day, Pete, thanks.

Wed, 06/27/2012 - 16:07 | 2566195 slewie the pi-rat
slewie the pi-rat's picture

next step for india = 6102

L0L!!! keep drinking, tyler!  does the indian post office still sell its own gold coins...?

this link is 15 months old [mar, 2011]...

In India Post Office Is Selling Gold Coins Like Hotcakes ... In India Post Office Is Selling Gold Coins Like Ho... Gold miners' comments ... extended its novel scheme to sell gold coins through almost all the post offices in ... just click on the link to see what they did last year! and for some of the propagananda too
Wed, 06/27/2012 - 16:19 | 2566235 danster82
danster82's picture

the vast majority in India never have a hope in hell of buying gold anyway so its irrelvant for them, they just remain poor as fuck as always, but not to worry at least nearly a billion people in poverty translates into a handful of people in absolute affluence.

The India poor need to drop the banking system entirely, including gold, and use their own alternatives, they should start using bitcoin on mass for their transactions, be the first country to do it and be an example to the rest.

Wed, 06/27/2012 - 17:31 | 2566500 GlomarHabu
GlomarHabu's picture

You,ve got the proper avatar. Keep it pulled down tight.

Wed, 06/27/2012 - 19:42 | 2566844 Matt
Matt's picture

Maybe if there was a cellphone client that didn't require constant internet connection to stay up-to-date. And was ran by the State and everyone was given equal share of new money as it came into existence.

Wed, 06/27/2012 - 16:26 | 2566267 Alert
Alert's picture

Go ahead ban gold! This should be bullish for Silver!

Wed, 06/27/2012 - 16:28 | 2566275 GlomarHabu
GlomarHabu's picture

Many of the Southeast Asia countries as well as India have a ritualistic/marital/psychological attachment to gold.  This recent move will be ephemeral for the core culture will reject it en toto. Travel to those areas of the world and observe every woman adorned with some gold.

Wed, 06/27/2012 - 20:06 | 2566890 Bringin It
Bringin It's picture

Jing.

Wed, 06/27/2012 - 16:34 | 2566298 emersonreturn
emersonreturn's picture

why, if india has agreed to trade with china using china's currency, and iran in commodities or currency other than dollars, and china is stockpiling gold (supposedly to back its currency), why should india discourage people buying gold coins...especially as it apparently allowed the sale of coins to counter the influx of dollars?

Wed, 06/27/2012 - 17:07 | 2566428 DosZap
DosZap's picture

why, if india has agreed to trade with china using china's currency, and iran in commodities or currency other than dollars, and china is stockpiling gold (supposedly to back its currency), why should india discourage people buying gold coins...especially as it apparently allowed the sale of coins to counter the influx of dollars?

Because the PTB there see the metals as making the Rupees fall off the cliff.

Indians know wealth, and it aint paper.

Thu, 06/28/2012 - 01:10 | 2567433 emersonreturn
emersonreturn's picture

thank you DosZap.

Wed, 06/27/2012 - 16:36 | 2566306 Bunga Bunga
Bunga Bunga's picture

Unbelievable that banks still support Barbarism.

Wed, 06/27/2012 - 16:58 | 2566388 Whiner
Whiner's picture

That couldn't happen here in the good old No. One, USA. all the prudent thinkers have got their gold, except for me. I was robbed by a burglar who threatened to kill me and my children if I called the cops or...or even made an insurance claim. Some of it I buried but now I have dementia.

Wed, 06/27/2012 - 16:52 | 2566363 Jack Sheet
Wed, 06/27/2012 - 17:04 | 2566417 bugs_
bugs_'s picture

we temporarily allowed it and now we are temporarily not allowing it

nothing said about silver - which is a big deal in India.

Wed, 06/27/2012 - 17:05 | 2566421 cranky-old-geezer
cranky-old-geezer's picture

 

 

Central banks can't stop gold.   Governments can't stop gold.  Nobody can stop gold.

Wed, 06/27/2012 - 17:09 | 2566433 Jack Sheet
Jack Sheet's picture

Presumably it is adorning the pussy in your avatar

Wed, 06/27/2012 - 18:19 | 2566628 Ignorance is bliss
Ignorance is bliss's picture

Love your avatar. Makes me want to leave ZH and see if there are any pink panties nearby.

Wed, 06/27/2012 - 18:20 | 2566629 Ignorance is bliss
Ignorance is bliss's picture

Love your avatar. Makes me want to leave ZH and see if there are any pink panties nearby.

Wed, 06/27/2012 - 20:09 | 2566896 Bringin It
Bringin It's picture

Pink camel toe. oolala

Wed, 06/27/2012 - 17:12 | 2566442 Chippewa Partners
Chippewa Partners's picture

I think India has a divorce rate in the single digits so you know more than a few unhappy folks in the midst craving for something "new" .   And maybe 900 million Indians going to bed every night a little hungry, give or take a hundred million.   And why is every flea market that sells shiny jewelry so crowded. 

Gold isn't going out of style in India any time soon.

  

Wed, 06/27/2012 - 17:17 | 2566454 SDRII
SDRII's picture

Rupee sell off correlates almost perfectly with the passage of the Iran sanctions and rollback of the retail deregulation late last year. peaked in Feb and downhill from there. The ratings agency downgrades and the gold taxes. Throw in a Russian aircraft carrier and nuclear sub and some insurgent attacks.

 

Something about timelines

Wed, 06/27/2012 - 17:20 | 2566466 cougar_w
cougar_w's picture

no moar goldz 4 u bichez

Wed, 06/27/2012 - 17:23 | 2566477 No Euros please...
No Euros please we're British's picture

Curiously the Indian Government started to suppress gold imports, initially with their failed import duty hike, just after a deal with the US to buy liquid shale gas. Coincidence?

Wed, 06/27/2012 - 17:33 | 2566505 fatlibertarian
fatlibertarian's picture

Pretty soon world governments are going to make it a crime to profit if it hurts a bank or government.  In fact, world governments will make "bad things" a crime. I mean, what better way to control markets and insure that bad things never happen if you make bad things a crime? Brilliant!

Wed, 06/27/2012 - 17:41 | 2566530 falak pema
falak pema's picture

that is the soul of Keynesian economic doctrine. Don't let the barbaric relic throttle fiat fed demand cycles  in the downturn.

We are in the downturn. We are in fiat pump, albeit in currency war, and letting gold take the upper hand means that recession becomes deep depression. Gold is good for dampening inflation fed by runaway growth; not in the downturn.

What India wants is for its disposable income to go into consumption or investment, not into full throttled illiiquid financial havens. 

Government perception of the business cycle and people's perception are at loggerheads; as the people fear deep stagflation that destroys buying power.

Wed, 06/27/2012 - 17:33 | 2566509 Signs of the end
Signs of the end's picture

I am from India and this does not surprise me one bit. The older generation in India trusts no one, least of all the government. The younger US / UK educated ones have been fooled into stock market / paper investments but they too are learning fast. I have written extensively on the (non) miracle of the Indian Economy and have witnessed first hand the devastation caused in India by globalization even as steel and glass towers and 6 star hotels pop up in Delhi and Bombay. The Gandhi family (not the current generation) kept India tightly sealed up, especially to US corporations. This state of affairs came to a head when Indira Gandhi kicked out Coca-Cola in the late 70's. For this audacity, she paid with her life as did her son Rajiv Gandhi. Only then did India open up to foreign investment that has more efefctively colonized this ancient nation in 20 years than the Brits did in 300. These are a couple of recent articles I have posted on India:

 

Incomplete infrastructure chokes India's growth / 

http://apocalypse2010.blogspot.ca/2012/06/incomplete-infrastructure-chokes-indias.html

India's currency, the Rupee continues to devalue as Economic slump deepens

http://apocalypse2010.blogspot.ca/2012/06/indias-currency-rupee-continues-to.html

 

Wed, 06/27/2012 - 17:44 | 2566549 Jack Sheet
Jack Sheet's picture

Thanks, interesting . Why exactly is the rupee tumbling?

Wed, 06/27/2012 - 21:01 | 2567018 Signs of the end
Signs of the end's picture

Unlike China, India has a trade deficit, it imports more than it exports, which means it has more dollars going out than coming in. China on the other hand has more exports than imports, so it has more dollars coming in than going out. So the Chinese problem is how to keep their currency from rising whereas India's problem is how to keep it from falling. There is nothing India can do to stop the fall, inflation may turn into hyperinflation in this nation and a billion zombies running around will be worse than any night of the living dead movie that hollywood can concoct. 

http://apocalypse2010.blogspot.ca/

Thu, 06/28/2012 - 00:10 | 2567358 Vendetta
Vendetta's picture

Sounds about right.  I read about folks in India, very poor, who made various articles of clothing or adornments and they were devastated by the factory 'goods' ruining their only means of survival.  Then there are the stories of the farmers taken to the cleaners by Monsanto and their businesses and lives essentially destroyed.  Fareed Zakaria wrote a one sided story for newsweek about the 'miracle' of globalization in India that was so biased and non-journalistic that I cancelled a 35 year subscription to the rag that passes as 'news'.

Wed, 06/27/2012 - 17:37 | 2566528 Jack Sheet
Jack Sheet's picture

Where is Oh! Regional Indian? In jail?

Wed, 06/27/2012 - 23:18 | 2567266 Non Passaran
Non Passaran's picture

In late May that bozo was claiming by mid June there would be some sort of collapse or crash.

Wed, 06/27/2012 - 17:37 | 2566529 SqueekyFromm
SqueekyFromm's picture

This gold fetish stuff is crazy. The only reason to buy it is the HOPE that some future person will give you more "purchasing power" then, than what purchasing power you put into it now. That is nothing but SPECULATIVE buying, and what do we call it when people pay increasingy stupid amounts of money on something betting that somebody else will pay more for it in the future- - -A BUBBLE!!!

That one ounce of gold cost about $1,600, and some idiots are thinking it will rise to $5,000 or more. Sooo, ask yourself, which would you rather have in the future following some financial apocalypse: 1 ounce of yellow metal or 1,600 pounds of rice??? Which do you think would better "buy" you into some future post-apocalyptic agrarian society- 1 ounce of shiny yellow metal, or 150 shovels and picks???

Perhaps the Indian Government realizes that the country would be better off if people were buying useful and practical things, or investing in needed improvements instead of buying shiny yellow metal to hide in the mattress.

Squeeky Fromm, Girl Reporter

Wed, 06/27/2012 - 18:08 | 2566607 Harry Dong
Harry Dong's picture

seriously? where's the /sarc tag?

oh I get it, you're MDB...

Wed, 06/27/2012 - 19:01 | 2566743 unununium
unununium's picture

Let's assume you are serious for a moment.  Here's what you (and Warren Buffet, and Nouriel Roubini) forgot, and must always remember:

Precious metals are an alternative to cash.  NOT an alternative investment.

Wed, 06/27/2012 - 20:56 | 2566999 SqueekyFromm
SqueekyFromm's picture

Well, first of all, I am serious about what I said. Now, let me ask you and everybody else who invests in physical gold, what do you plan to do with said gold??? Are you going to melt it down and make a nice statue or sculpture for your living room??? Do you plan to make jewery out of it, or perhaps plate your faucets with it??? OR, and here is what I bet most of you are going to do, is you are going to hang on to it and then try to sell it at some future date for more money (purchasing power) than you paid for it. Others may be planning to barter for food and stuff in a Mad Max World but most of you are buying it for one reason - - - on the HOPE that it will sell for more in the future than what you bought it for.

Now, if that is your plan, then don't you have every reason in the world to pump up the alleged wisdom of buying gold??? Because you can't very well come out and tell people that holding a metal which has practically no value outside of making jewelry isn't very smart because then you would be undercutting your own position.  

This is known as a conflict of interest, and one reason why I don't buy into the gold thing. Plus, why do I want to own something which I must sell by its very nature, when that something has little or no value outside of what somebody else might give me for it in the future. I might as well buy a bunch of Beanie Babies.

Squeeky Fromm, Girl Reporter

Wed, 06/27/2012 - 21:07 | 2567027 TheFourthStooge-ing
TheFourthStooge-ing's picture

.

Now, let me ask you and everybody else who invests in physical gold, what do you plan to do with said gold???

Spend it, eventually.

Wed, 06/27/2012 - 21:07 | 2567028 All Out Of Bubblegum
All Out Of Bubblegum's picture

Assuming you're not a troll, are you at all familiar with the history of Weimar? Those with gold and silver were able to trade their gold and silver for food when those holding paper couldn't buy a whiff of dinner with it.

I have metal to provide for my family when paper fails. No matter how bad things get, someone will always trade gold and silver for necessities. The past 100 years have been an anamoly in human economic history. The free pony rides will end someday.

Wed, 06/27/2012 - 21:50 | 2567109 SqueekyFromm
SqueekyFromm's picture

Good luck with your plan, but if you plan on swapping your gold for food in the future, why not just buy food now and set it aside??? A couple of ounces of gold will buy a heck of a lot of food staples, and ammo, and even land where you can run to. In the meantime, you still have to hope that someone will be willing to pay you more for a thing which is basically useless at some undefined point in the future.

And, India which is a very poor country, has a large number of its people putting their money into a shiny yellow metal, instead of fun stuff like indoor toilets and food. Maybe that is why they are trying to discourage the practice before they turn into a nation of Garden Gnomes guarding their stash of shiny yellow metal from the other gnomes.

Squeeky Fromm, Girl Reporter

 

Wed, 06/27/2012 - 22:34 | 2567184 Richard Head
Richard Head's picture

If you only knew what you don't know. Please keep quiet and refrain from highlighting your own idiocy. Thanks.

Wed, 06/27/2012 - 22:29 | 2567175 sumo
sumo's picture

"Plus, why do I want to own FRNs which I must sell by its very nature, when those FRNS have little or no value outside of what somebody else might give me for it in the future. I might as well buy a bunch of gold coins."

Fixed it for you. Yes, good question - why own, or rent, Federal Reserve Notes, instead of real assets?

Wed, 06/27/2012 - 19:35 | 2566829 epwpixieq-1
epwpixieq-1's picture

Agreed on some level, but ask your self, with all this paper "wealth" sitting around in the system, where will it swing ( if allowed of course ) ones the truth is realized by, the mass players, through whatever means, that the system is unsustainable. I bet that this will not be the rice, even as you mentioned it is a lot more "useful" than Gold.

I can bet also that my and yours meaning of usefulness, which by itself a quite stretchable concept, differ even at the current moment, and not to speak about this possible future one.

Wed, 06/27/2012 - 19:35 | 2566831 CaptainObvious
CaptainObvious's picture

Squeaky Fromm, eh?  So tell me, how is old Charlie doing these days?  Tell him Helter Skelter is getting closer.

Thu, 06/28/2012 - 00:37 | 2567388 Vendetta
Vendetta's picture

http://www.youtube.com/watch?v=PRci4BNO0pQ

THe people in Zimbabwe knew the value of gold, those who had it were fed, those who didn't, starved.

Wed, 06/27/2012 - 17:41 | 2566542 deerhunter
deerhunter's picture

Confucious also say redhead who fly airplane have cracky up,,, and he who have intercourse in strawberries gets ass in jam,  Laughter,  the best medicine, 

Wed, 06/27/2012 - 17:44 | 2566551 msjimmied
msjimmied's picture

If a reset is a foregone conclusion, Indians would be sitting pretty. They will not be able to confiscate it. Generations of accumulation, the people will not give it up easily, there will be blood on the streets first. 

Wed, 06/27/2012 - 18:08 | 2566608 Sweet Chicken
Sweet Chicken's picture

Green jacket gold jacket .....who gives a shit!

Wed, 06/27/2012 - 20:27 | 2566937 chump666
chump666's picture

Yes, the BRICS are going down before the US.  How things play out.  Watch China, the Yuan con job is on (Australia is about to be tapped), all the while the Chinese (and India) are stockpiling USDs and now gold.

Now remember the creditors (BRICs) losing currency (value) firepower means they are either suffering HUGE amounts of inflation (unreported) or the economies are just imploding.  Either way, countries that sign up to the YUAN (China) trade will get fleeced, once the CNY goes down like the INR did (as ZH pointed out)

Getting bad out here.

Wed, 06/27/2012 - 22:28 | 2567169 chump666
chump666's picture

Ah sh*t China getting all nutso:

from wires

SC: China corporate USD sales to banks have tapered sharply this year

Move in line with talk of growing USD shortage in the mainland

Spread between 1Y CNY NDF & CNH spot near record highs of 900 pips

Only PBOC intervention & fixes have kept CNY from weakening sharply

If pace of USD demand intensifies, expect a pick up in RMB weakness

= short the BRICs and commodities.

Nasty as can be.

Wed, 06/27/2012 - 20:34 | 2566957 rosiescenario
rosiescenario's picture

That should scare any Indians debating whether or not to buy more gold into buying as much as possible and taking out a second on their hovel......

Wed, 06/27/2012 - 22:32 | 2567167 BlackholeDivestment
BlackholeDivestment's picture

The Goldman Golden ''(g)ods work'' prophetic mark of the beast standard practise of corruption is the fallen star and bitter root of the strong delusion and the revelation of the offer of temptation which opened up the human host to the alter slaughter of the black hole, death, which invoked the attempt to escape the (g)ods work of the Novus Ordo Seclorum Mark of the Beast ritual slaughter that defines the darkness of the market Whores of Babylon. http://www.youtube.com/watch?v=wBKcl4qLiPE&feature=related

It's the image of a movie, or a made for TV ''program'', only ''Jerusalem'' is the black keyhole of Earth; where the wormhole is turned and the battle of the builders of the Golden Calf alter fire ''flame job'', in this case the Indian portion of the ''(g)ods work'', within the bottomless pit of the Sin Tax Error ...slaughtering the Son of Man, there is no savior of the world of war and ''the craft'' coming for the U.N.Builders of the Market Stargate coming to rescue the one('s) that opened up Hell on Earth.

Those persons; that accepted the masonic lodgings of Earth and the number of the beast wilfully, by which the hosts of mercy were marked, bought, sold, traded, and the laborers of the harvest are slaughtered upon the alter of knowledge and contempt, deception and death, define the secret(s) of the (g)ods, Satan, the darkness of Lucifer... http://www.youtube.com/watch?v=AR834FxdnIA 

...well they are in trouble.

...it's payback time, when the those Whores of Babylon, the cheering crowd that followed her down until the light of her bones is illuminated in darkness, are about to discover the meaning of Victoria Vengeance. http://www.youtube.com/watch?v=ZJpyO5t4Wx8 Ah ha ha ha haaaa, the Light of Glory shall cause those caught in the crowd to perish, ...sadly like lost golden treasure. To HELL with the new world executive order of the Suicide Vampire Squid!!!

Wed, 06/27/2012 - 22:28 | 2567168 sankol
sankol's picture

It will not really succeed in halting gold sales. The vast majority(abt 95%) of gold sales in india, in both coins and jewellery form are done by privately owned jewellery shops. Buying from the banks is much more expensive as they have a lot of commision tag ons to the gold price. Infact the selling of gold coins by the banks is a new thing, it was not much in vogue in the years past. Theres simply no way the Govt can stop buying of gold on the market here, if they try to , the black market route for the same will spring up here.Before the economy opened up, the Government tried to control gold sales.It could easily go down that way again. Smugglers made hay importing the gold mainly from Abu Dhabi then. Matter of fact why gold is so popular in India is due to the following reasons :

- Tax avoidance is a big thing here. Especially rich people and businessmen. So they buy gold in order to hide their sources of black money.

-Wedding purposes.

-Farmers buy gold when they get cash. Reason being that theres no banking system in the villages. So gold is the best way of keeping their money safe.And its part of tradition as well.

 

Wed, 06/27/2012 - 22:38 | 2567193 sumo
sumo's picture

Another two reasons:

Gold is portable. In a bribe-the-border-guards-carrying-machine-guns emergency, you can carry a lot of wealth if you need to.

Gold keeps its value. Gold coins and jewelry that are hundreds, or thousands, of years old are still valuable and tradeable. Old paper notes and bond certificates, not so much.

Wed, 06/27/2012 - 23:19 | 2567272 PulpCutter
PulpCutter's picture

Doomers making a mountain out of a molehill. 

The order bans sales of gold coins BY BANKS.  Can you walk into your local bank, in the US, and buy gold coins?  Didn't think so; no big deal, you go to a dealer.  (Yes, I know some European banks buy/sell common gold coins like Krugerrands.)

Paranoia is a disease, and is treatable, folks.

Thu, 06/28/2012 - 00:18 | 2567353 zebrasquid
zebrasquid's picture

.

Thu, 06/28/2012 - 00:24 | 2567367 zebrasquid
zebrasquid's picture

I recall Charlie Munger, as CEO of Wesco (now folded entirely into Berkshire, I believe) owned a big old tract of oceanfront property up around Santa Barbara. It was a huge part of his overall portfolio.  They owned it for many decades. 

Thing was, they had been trying to get permits for development rights over those many decades, and had no luck obtaining same since the Coastal Commission had basically squashed any big new development along the ocean (not to mention hostile environmental groups and local citizens who liked the open space fine, just the way it was).

He held it, and held it, and held it -- kept paying RE taxes, and paying lawyers to keep fighting for the permits, etc...plus all the usual costs (including opportunity costs) of owning raw land that just sat there generating zero income.

While he had held it through the late '70s gold had gone up, what, 15 times? No lawyers' fees, no real estate taxes, no carrying costs!

Who's the relic, Charlie? 

Thu, 06/28/2012 - 01:26 | 2567443 honestann
honestann's picture

Well, this is an absurd move, but telling banks they cannot sell gold is a far cry from saying NO business can sell gold.  Maybe this is a good time to open a private chain of bullion selling shops in India.  If all else fails the indians will simply buy big honking-heavy gold jewelry.

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