Demonetization — As I See It

There have been a lot of debates and discussions about #Demonetization, it’s effects, whose interest it serves and so on…

Every person is trying to connect the dots and understand it to the best of their understanding and insight. Now, since different people have different understanding of how things work, they connect the dots differently. In a way that justifies their outlook or understanding of the world.

I have been critical of this move and don’t entirely support it, or believe that it is a move in people’s interests. Now, I have come to my conclusions and have connected the dots based on my understanding of how people and the world functions.

So I am compiling some of my observations and some excerpts from different articles, sources from the last two years, that will help you see how I have connected the dots in order to decode the mystery of #Demonetization (for myself)…
One thing that I have observed is that, in today’s capitalistic world, large scale policies, decisions are not driven by masses or their interests. They are driven by concentrated centres of power through political and economical lobbying.

George Orwell once wrote “If you want a picture of the future, imagine a boot stamping on a human face — forever.”

So now try and understand #demonetization in this light.

From the get go, it seems, despite of all its promises, claims and political rhetoric, demonetization was driven by three major factors:

  1. BJP government was under pressure to act on it’s election time promise of attacking black money. Specially because of upcoming assembly elections in states like UP. But the people in the Government couldn’t obviously attack black money and the people involved in such corruption because almost every big player in politics and business world is involved in such corruption. Truly attacking black money would mean attacking its own party members, its own political class, and its own close business allies, who the people in government need for financial support. It is a symbiotic relationship between political and economical interests(one where each depends on the other for survival and mutual benefit). So, the Government had to roll out a move that would convince or at least the confuse the masses into thinking that this move was sincere in its promises of ending corruption and attacking black money, while not really doing so. They had to look no further than 1978 for the idea, when demonetization had been implemented and had failed to end corruption or black money. A perfect move to seem like they are attacking black money and corrupt people, while not doing exactly that. What Government misinterpreted seems to be people’s willingness to accept such a radical step and the damage it will do to economy. How this move was poorly-implemented is a different saga in itself that is still unfolding page by page, day by day. Also, Government claims, over the last one month, have conveniently shifted to going cashless from initial promise of curbing black money. So let’s not go into that. To conclude the first point, it seems, that #Demonetization was supposed to be an empty move by its very design as far as curbing black money is concerned. The current government rhetoric of “cashless economy” seems more accurate. So let’s try and understand that.
  2. Another thing this move was meant to do was help the Banks improve their reserves and sheets. To somehow try and get all or a fraction of the lakhs of crores they have lost due to bad loans to crony companies. Apart from helping Banks recover from their previous mistakes at the cost of common man, this move also works to boost their future business. With cash based transactions playing a massive role in Indian economy, where only 15% of transactions are electronic, imagine the amount of money that is in circulation without banks coming into picture at all. Now imagine how many folds Banking business will grow if every single transaction in the country or in the world went through Banks! The growth is not even imaginable…So, banking interests have every reason to push for a cashless economy. Do common people have such strong urge to move towards an electronic economy? Not at all! But that doesn’t matter. Economy is not driven by what people want, its driven by business interests. At best the reason people (mostly urban) don’t mind this shift is because there is an aspect to this transition that works for them- convenience/comfort. That’s how they always get the masses to accept any and all policies. Convenience. There are always two sides to any decision or policy. But the government and businesses only present the masses with one side of the story. That is the marketable side. Everything is always about the people, about you and how every one wants to look after your interests. What they never talk about is how these policies work for or benefit them! That is marketing 101.
  3. Finally, in order to control and centralise all transactions and take away other alternatives from people’s hands Banks seem to have been working for very long time. First the gold standard was abolished gradually across the world, because that allowed people to back their currency with actual gold. But cash based economy still allows people to skip the banks in their day to day life if they want to. So logical next step is to remove cash all together. Get everybody online and get all their money in banks. So banks will have full control over people’s money and people will be left with no choice but to go to the banks.. In order to demonstrate this point I am compiling a few excerpts from different articles that can help one understand this particular line of connected dots and also understand the fact that this is a global phenomenon and not just happening in India.

A. BTCA- The Real Reason behind Demonetization:
Bill Gates, who just happened to be in India on business a few days after the government’s decree.“The world as a whole will go cashless, but predicting for any country when that will happen is very hard,” he told the Indian prime minister. Gates has good reason to be excited at such a prospect. After all, both, Microsoft and the Bill and Melinda Gates Foundation stand to benefit enormously from a more digitized Indian economy. As the Indian financial daily Business Standard notes, Gates wants to partner with the Indian government on a whole raft of major initiatives, including cyber crime, digital health, digital literacy, e-agriculture and, of course, e-payments.

Gates has good reason to be excited at such a prospect. After all, both, Microsoft and the Bill and Melinda Gates Foundation stand to benefit enormously from a more digitized Indian economy. As the Indian financial daily Business Standard notes, Gates wants to partner with the Indian government on a whole raft of major initiatives, including cyber crime, digital health, digital literacy, e-agriculture and, of course, e-payments. In 2012, the BMG Foundation helped launch the Better Than Cash Alliance (BTCA), a UN-hosted partnership of governments, companies and international organizations whose stated mission is to “accelerate the transition from cash to digital payments globally through excellence in advocacy, knowledge and services to members.”

As we’ve pointed out before, in light of the inexorable advance of electronic payment systems, cash’s days may well be numbered. But there is a whole world of difference between a slow natural death and euthanasia. It is now clear that an extremely powerful, albeit loose, alliance of governments, banks, central banks, start-ups, large corporations, and NGOs are determined to pull the plug on cash — and their vehicle of choice is the BTCA. [It is no surprise that mastercard has improved India’s rating after the demonetization move]

The BTCA’s membership list reads like a Who’s Who of some of the world’s most influential corporations and institutions. They include Coca Coca, Visa and Mastercard, the Citi Foundation, the US Agency for International Development (USAID), the World Saving Banks Institute, which represents 7,000 retail and savings banks worldwide, the Ford Foundation, the Clinton Development Initiative, and a bewildering alphabet soup of UN organizations.

B. The War On Cash Transparently Totalitarian: Centralize the control over people’s money []

Their goal is to eliminate the use of hand-to-hand currency, so that governments can document, control, and tax everything.

It’s exactly like what Ron Paul said: “The cashless society is the IRS’s dream: total knowledge of, and control over, the finances of every single American.”
Joe Salerno: The War on Cash is the attempt by governments to phase cash out of their economies. Governments hate cash because they hate the financial privacy cash makes possible. And they prefer that you keep your money in a bank to help prop up an unsound fractional reserve banking system.

C. Denmark moves closer to a Cashless Society []
It aims to reduce costs and increase productivity for Danish businesses.
Finansrådet, a Danish finance industry lobbying group, says the change would free retailers from the cost of security, and the burden of managing change and notes. The world’s central banks have a problem. 
When economic conditions worsen, they react by reducing interest rates in order to stimulate the economy. But, as has happened across the world in recent years, there comes a point where those central banks run out of room to cut — they can bring interest rates to zero, but reducing them further below that is fraught with problems, the biggest of which is cash in the economy.

D. Citi’s Australian bank branches go cashless and Citi Group has been pushing to abolish cash for some years now.

So it seems that while the reasons being given to justify a transition towards a cashless society vary from one country to another. These justifications seem to be nothing more than a classic case of trojan horse. Mask the real intentions behind something that people of that country can relate to and will support and sneakily push the real agenda of centralization of wealth. In India it was to curb black money, in Denmark it was to reduce costs and help the economy, in Australia citi bank went cashless because there were not enough cash transactions (which seems like that Australia had moved to the final stage of the transition to cashless society). But the underlying story is the same. To benefit a few at the cost of many and make the masses more dependent.

Now, having this point of view about demonetization, I don’t have the luxury of justifying the pain and suffering this move is causing to the countless people in the name of better India. Because as I see it, that’s a lie. May be a more centralised, more controlled and a lazier India seems more appropriate.

The grip is getting tighter. Pay attention!!!