War on Cash Spreads to India

Wednesday, December 14, 2016
By Paul Martin

By: John Browne
GoldSeek.com
Wednesday, 14 December 2016

Over the past year, central banks, commercial bankers and prominent economists have expressed the view that digital money and transfers should replace large denomination cash and cash transactions. This dramatic transition has been fostered under the guise of the public interest in an effort to curb terrorism, tax evasion and criminal activity. Many observers contemplate more sinister motives that involve increased government control of economic activity. The latest country to engage in this ‘war on cash’ is India.

In a TV announcement on November 8th, India’s Prime Minister Narendra Modi announced that the Reserve Bank of India’s large denomination 500 and 1,000 rupee bank notes, worth some $7.5 and $15 respectively, would lose their status as legal tender on midnight on December 31, 2016. That meant holders of those notes (which represent 86 per cent of the value of all outstanding rupee notes) had less than two months to exchange the notes for smaller new notes, or lose out completely. The government also mandated than any large exchanges had to be accompanied by tax returns in order to prove that the cash generated had already been taxed.

The shock waves from this announcement fueled fear and panic among the Indian population which is heavily cash-oriented. As few people have bank accounts and banks are thinly spread in rural areas, many Indians have been left holding paper currency redeemable only in banks which often are difficult to access. To make matters worse, banks soon ran out of small denomination notes. The result was chaos, rioting and trauma-induced deaths. Millions of poor Indians were unable to buy necessities or transact business. Many merchant shops had no alternative but to close.

The BBC’s website notes that India, the world’s seventh largest economy “…is overwhelmingly a cash economy, with 90% of all transactions taking place that way.” At a sudden single stroke a socialist Prime Minister has converted most of the nation’s private cash into bank deposits subject to direct governmental controls including spending and withdrawal limitations. Furthermore, the new bank deposits can be leveraged up as bank loans to government and to allow banks to purchase government bonds to finance social programs.

The Rest…HERE

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