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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rsh00's picture

Ha ha ha...good luck taxing transactions where the rupee is not involved at all. Gold *will* circulate as money and directly purchase goods and services (including bribery!). Fat chance that the Govt can do anything about it.

OpenThePodBayDoorHAL's picture

Just remember where you buried them. The guy who buried these apparently forgot to tell anybody the location:

http://www.dailymail.co.uk/sciencetech/article-2164897/Iron-Age-coins-wo...

Son of Loki's picture

"Hecho in India" T-shirts at Walmart are about to get alot cheaper for us.

lasvegaspersona's picture

Bug

Richards is a smart guy but he is just guessing at future gold policy...like everyone else.

TomGa's picture

That's sooooo 1700's. Get past the Enlightenment, will you.  It's a small banker-ruled world, after all.

/sarc off

slaughterer's picture

I've got my gold sewn inside my clothing.  Can't get me.  

kito's picture

apparently you havent been updated on TSA..........

CaptainObvious's picture

TSA, heh heh.  The metal detectors are unplugged and you can sneak the gold through the naked body scanner with a pocket in the side seam of your shirt.  The TSA couldn't find gold if it was lit up with neon and shot off sparks.  The only thing the TSA is good at finding is iPads to steal.

stockoptimistic's picture

In an economy where gold loans are booming, through financiers you never heard of, something is wrong beneath the surface. I mentioned this a previous ZH India article too. I will love to see some article covering that aspect too - how come a society in love with buying gold is now one of the biggest markets for gold loans itself.

dexter bland's picture

The gold bugs will ignore that fact until its too late. Look out below if the subprime gold liquidations start.

13% of households now have some kind of loan against their gold. That's a lot for a country with an underdevloped banking system. Tens of millions of subsistance farmers now anxiously waiting for the monsoon rains to see if they can meet the next installment.

Blame the government if you wish but any way you look at it demand from the world's biggest gold market is falling off a cliff.

dexter bland's picture

My posts on this site are never popular. That's because they're true.

I am crying all the way to the bank.

 

FinkPloyd's picture

You have no clue ...

 

http://timesofindia.indiatimes.com/business/india-business/Rupee-Eurozone-crisis-hit-gold-demand-in-India/articleshow/14430762.cms

Buying from rural areas accounts for about 60 percent of gold imports, and farmers depend on monsoon rains for better yields, production and profits. 

Farmers often invest in gold due to a lack of banking facilities in rural areas.

i.e. farmer park their money in gold and take out loans against it for cash. It is the banking system in rural areas. Also ironically the govt regulated the value of a cash for gold loan to 60% of gold value.When gold becomes a teir 1 capital asset  a lots going to happen.


MarsInScorpio's picture

The Ultimate Thief: the Government.

 

Reading about how the US used the stolen gold to finance its programs during the depression, one cannot help but feel complete revulsion.

 

However, it should be noted that if the blatant theft of one's property - scammed with a too-low compensation - doesn't bring about a revolt - what makes any of you think anything the government does now will result in a revolution?

 

The sheeple, like the poor, shall always be with us.

-30-

BigMike's picture

India should simply back the Rupee with gold

Right-on Left-off's picture

Yes!  Defect from the defectable!

LeBalance's picture

that's a joke, right?

fiat uber all youse!

Comay Mierda's picture

India should simply back the Rupee with gold

common sense has no place in politics.

138's picture

'India should simply back the Rupee with gold'

Just ask Muammar how that went...

http://www.youtube.com/watch?v=PLJu0X14vmg

 

DosZap's picture

'India should simply back the Rupee with gold'

Just ask Muammar how that went...

Mummar wasn't NUCLEAR.

ozzzo's picture

I miss Carter. New Clear sounded so much nicer!

Hype Alert's picture

If you want to be taken seriously, never have Cynthia McKinney or Hank Johnson in your newscast.

Rip van Wrinkle's picture

What and find the American Fifth Army on the Pakistan border ready to invade and destroy your country? Just ban it, Much easier and less costly.

rsh00's picture

India should simply back the Rupee with gold

Or maybe India should simply back the Rupee with Oil!

Ridiculous! Indian govt has neither gold nor oil. Both have to be imported and both are consumed by its citizens. Of the tiny amount of foreign exchange that RBI has (unjustified stash according to me) only about 4 or 5 % of it is in gold. And even that, most of it is not in RBI's possession...probably still held in custody by IMF (duh!?!)

buzzsaw99's picture

terrorist goldbugs. lulz

GOSPLAN HERO's picture

Gold, silver, and copper jacketed lead!

Mr Lennon Hendrix's picture

Why would anyone want gold anyway?  Ya can't eat it!

A Lunatic's picture

Can't eat cows either..................

CloseToTheEdge's picture

fuckinA thats funny as hell

XitSam's picture

Especially can't eat a golden cow.

kito's picture

lets see how religious they remain when the shtf and they are out of rice and naan bread...................hamburgers looking good right about then...............

Tuco Benedicto Pacifico Juan Maria Ramirez's picture

Jewish conundrum:  "Pork for Free!"

akak's picture

I wonder if the book "Green Eggs and Ham" is banned in Israel?

ddtuttle's picture

Ah yes, I can't wait for my lunch: a salad of freshly minted $1 dollar bills, topped with a three coin coulee of niclkes dimes and quarters.  

WTF MORON came up with this "You can't eat gold" thing.  You can't eat any form of money. If you could eat it, they would call it FOOD not MONEY. 

King_of_simpletons's picture

You can eat bananas in a banana republic. That's a form of currency there.

Bunga Bunga's picture

Does can eat bananas in a banana republic count as democracy?

fuu's picture

Roubini

http://www.zerohedge.com/article/roubini-blasts-barbarous-relic-recommends-spam-over-gold

"Much like a
fiat currency, gold’s value is based largely on the irrational beliefs
of investors. In a depression or near depression, one would be better
off stockpiling canned food and other commodities like oil that are
useful for riding out Armageddon. You cannot eat gold or burn gold."

Panafrican Funktron Robot's picture

I tried to eat my stocks, but then I realized that I couldn't eat a line of computer code telling me I "own shares".  Same thing happened when I tried to eat my bonds.  My house is unfortunately also inedible, as are my cars, television, computer, furnishings, etc., ie., basically anything in my house or stored as random digits in an account somehwere that I could actually sell and thus realize it's cash value, is inedible.  

mkkby's picture

Love eaten that green colored linen... yum, yum.

SemperFord's picture

I wish that chart showed the dollar against gold so we can let this BS stop already!

LawsofPhysics's picture

This is the other string of dominoes starting to fall - confiscation begins...

 

All physical assets of real value are a store of wealth when paper is worhtless.  What will be the next commodity/asset that the governments will try and outlaw in these "free" markets?  Silver? lead? oil? bread? beans? rice? rainwater?  More madness from paper-pushing fucks that think they can suspend gravity.

Cognitive Dissonance's picture

No no no no.

I've been assured this will never happen for several reasons, none of which I wish to support.

Beam Me Up Scotty's picture

Confiscation my ass.  If I can't have it, no one will.  There won't be a boating accident.  I'll just dump it in the bottom of the deepest lake I can find.

Diet Coke and Floozies's picture

Throw it into a volcano, back to the earth with it!

snaphooker's picture

Cryptonomicon by Neil Stephenson. A great read.

AnAnonymous's picture

Storing wealth in bread, beans, rice? not for that long. The preservation of them consumes.

TheFourthStooge-ing's picture

AnAnonymous stated as fact:

Storing wealth in bread, beans, rice? not for that long. The preservation of them consumes.

The AnAnonymousity of consuming resulting then in blobbing up of Chinese citizenism roadside excretions magnificently.

akak's picture

 

Storing wealth in bread, beans, rice? not for that long. The preservation of them consumes.

Finding logic or sense in the gibberings of AnusAnonymous?  The selfdenialization and insanitation of him consumes the brain cells of the non-Chinese Citizenism citizen.

Random_Robert's picture

"This is the other string of dominoes starting to fall - confiscation begins"

 

well of course...  you see, the world would be fair if everybody had the same credit rating, and the same checking account balance, and the same number of Gold ounces burried under the tree in the backyard...

 

And it's government's job to make sure this happens... /sarc