When the government makes your currency fail
Could gold free Indians from government fiat?
India has 18% of the world’s population. Bring the world’s largest democracy, India is the world’s bellwether of political freedom.
If India fails, the free world fails.
Jawaharlal Nehru, India’s first Prime Minister, committed India to a mixed economy. Nehru’s Fabian Society inspired socialism yoked Indians to statist penury for over half a century. The ruling Congress Party babus chanted the mantra of “poverty alleviation”; not poverty elimination. Command & control five year planning, pitchforked India’s Soviet funded public sector to the “commanding heights @the economy”. As a consequence, Indian enterprise, ingenuity & labour escaped underground & abroad. Some found refuge in the black economy, smuggling & money laundering. Others won Nobels through Harvard University, Stanford University & MIT. Still more populate the C-suites of Kleiner Perkins; Google & Microsoft.
Today, while, by any growth rate measure, the Indian economy has broken free from the shackles of Nehru’s permit-license raj vise, India still has the largest number of poor citizens (at least 276 million) in the world.
The land of Ratan Tata, Mukesh Ambani, & Azim Premji, is still a narrative of small farmer suicides, child trafficking & systemic corruption.
“Progress with everyone, progress for everyone,” Narendra Modi
From poverty alleviation to poverty elimination
A rationale for demonetization?
Like the Congress, a major plank of the ruling BJP party platform is eliminating poverty across India. Prime Minister Modi has asserted that he was elected to eliminate black money.
Empowering the poor, inclusive growth & progress with everyone, progress for everyone, were among the Prime Minister’s opening remarks when he announced that the high denomination INR 500 & INR 1,000 currency notes would cease to be legal tender.
" With all for the development of all”
We are with all citizens and for development of all citizens. This Government is dedicated to the poor. It will remain dedicated to them. In our fight against poverty, our main thrust has been to empower the poor, and make them active participants in the benefits of economic progress.
Is Congress : dole, poverty, welfare :: BJP : opportunity, wealth, supply?
ArthKranti Institute
Is this NGO at the heart of the demonetization?
Was the concept of the demonetization of India’s top two high denomination currency notes, born in Pune, Maharashtra?
Pune-based Arthkranti Institute 's Anil Bokil has been unstintingly evangelizing a wholesale overhaul of India’s economy.
The hope created by ArthaKranti Sansthan’s recommendations have gone viral on WhatsApp and Reddit. Its champions include India’s former President Pratibha Patil, from her days as Governor of Rajasthan & recently Narendra Modi, Prime Minister of India.
Will India implement the other components of Bokil’s strategy?
If fully implemented, Bokil’s proposals aim to solve India’s problems of: black money generation; price rise & inflation; corruption; fiscal deficit; unemployment; ransom; GDP & industrial growth; terrorism & good governance.
Bokil has slammed the ‘selective implementation’ of his proposals claiming that no one would have ‘got hurt’ in the process. (Updated December 23, 2016)
India makes its rupee fail
Reserve Bank of India Q&A
Who pays an income tax in India?
Though 2–3% of Indians file tax returns, just 1% of Indians pay tax.
Black money, parallel economy, shadow economy, underground economy
- The World Bank has estimated India’s shadow economy at 20.7% of GDP in 2007.
- India’s demonetizing INR 500 & INR 1,000 currency notes sucked 86% of the cash out of the Indian economy.
In India, 98% of consumer transactions are in cash.
- 50% of nominal Indian GDP (USD 0.95 trillion, PP: USD 3.6 trillion) is black money.
- If USD 1 trillion of this ‘black money’ were available to the government, it would cover India’s infrastructure spend for 5 years.
- 90% of India’s black money is in India.
Only 10% of India’s undocumented currency is outside India, in Swiss banks, Panama, the Caymans and the like. A part of this undocumented currency is invested abroad & then round tripped back to India.
Is this demonetization the biggest reform in India since independence?
This demonetization is one of 8 steps taken by the Indian government including the opening of 252 million new bank accounts under the Prime Minister’s Pradhan Mantri Jan Dhan Yojana.
Will this demonetization be the decisive battle in the war against black money in India?
- The World Bank estimated India’s shadow economy at 20.7 percent of the GDP in 2007.
The impact of this demonetization
- Over the last two days, USD 7.845 billion has been deposited into SBI, India’s largest bank.
- The Indian press has covered the collateral damage of this demonetization & its effects on housewives, queues at banks, the working poor, a slowdown in real estate transactions, the hassles of gold jewelers & gold bullion dealers, & capital controls.
- Opposition politicians like Rahul Gandhi & Arvind Kejriwal have vociferously weighed in, been debunked, supported & rebutted.
Also, see The Economic Times coverage of the demonetization. Printing of Indian currency in Pakistan has ceased; no demonstrations in Kashmir.
Hawala
Hawala money stocks are paper once again
The trust based hawala system has broken down. Stocks of paper money held by hawala brokers are paper once again with a wide ranging impact on terror financing, drug smuggling, gold & real estate.
“PM Modi’s masterstroke of demonetization of Rs 1,000 and Rs 500 currency notes has rendered unaccounted cash lying with hawala brokers useless. These are now mere papers…by one stroke the PM has dealt with corrupt politicians, bureaucrats and Hawala traders,” said chartered accountant Abhishek Aneja.
The hawala trade has collapsed overnight due to the demonetization of the currency…“Large volumes of cash lying with these brokers have now turned redundant, as it won’t be a part of the economy….it won’t revive in the next three months. Many traders are likely to go bankrupt….how many traders will survive to carry on….It’s also a big jolt to India’s film industry.”
Terror finance
FICN: Fake India Currency Notes
…in June 2013 the FATF stated that high-quality counterfeit Indian notes were “printed in Pakistan and then smuggled into India through transit points at Dhaka (Bangladesh), Sri Lanka, United Arab Emirates and Bangkok (Thailand)”. India, which joined the FATF in 2010, conveyed to the task force that fake currency notes were being printed with state-of-the art technologies which did not appear to have been developed by Pakistan.
Trafficking
Breaking the backbone of human traffickers?
“Every single rupee earned by the traffickers and slave masters is black money. This move will break their backbone.”
India is home 40 percent of the world’s estimated 45.8 million slaves, according to a 2016 global slavery index published by the Australia-based Walk Free Foundation.
Thousands of children, mostly from poor rural areas, are taken to cities every year by gangs who sell them into bonded labour or hire them out to unscrupulous employers.
Many end up as domestic workers or labourers in brick kilns, roadside restaurants or small textile and embroidery workshops. Many women and girls are sold into brothels.
Digital economy
Eliminating cash, currency notes?
Terming the government decision to demonetise Rs 500 and Rs 1,000 bank notes a “good move”, NR Narayana Murthy said one should be celebrating as the move would address issues like black money, corruption, and also promote digital economy.
When the currency runs out
Transactions without currency notes
India’s demonetizing of INR 500 & INR 1,000 currency notes sucked 86% of the cash out of the Indian economy.
In India, 98% of consumer transactions are in cash.
Even as the RBI & banks reconfigure ATMs, the void is being filled by traditional plastic & emerging payment processors like Paytm, MobiKwik & Snapdeal’s Freecharge.
MobiKwik saw a 40 per cent increase in app downloads within 18 hours of the official announcement. User traffic and merchant queries went up 200 per cent from its 35-plus million users. The company has revised its business targets. “With this policy change, we expect a 10-time impact and to easily hit $10 bn in payments volume by 2017. We believe we’d be able to reach 150 mn users by next year itself,” said Upasana Taku Upasana Taku, co-founder, MobiKwik
Arthakranti cherry picked
Anil Bokil says that the Modi government has cherry picked his proposals.
The rupee, gold & savings
Being a fiat currency, the rupee is a very leaky bucket for an Indian saver.
The rupee is a fiat currency i.e. declared by the Indian government to be legal tender. All fiat currencies like the rupee are portable, divisible, durable & fungible enabling them to be designated legal tender. While all fiat currencies are legal tender, no fiat currency can function, with any integrity, as a store of value.
No fiat currency is money.
Right from India’s independence over 70 years ago, the Indian rupee has never served Indians as sound, honest money.
Here is why the rupee is another example in the chequered history of the failure of fiat currency:
- Fiat: As recent Indian demonetization demonstrates, the government can declare any paper to cease being money. At its own discretion. As the government wills. The official rationale demonetization is terrorism & the underground economy.
- Fungibility: Especially with the 1,000 rupee note, the rupee has ceased to be universally fungible. Fake Indian currency notes (FICN) are produced under the patronage of Pakistan’s ISI. This means that high denomination Indian currency has fuzzy fungibility. In India’s cash economy this is a formula for widespread panic.
- Acceptabilty: Except Nepal & Bhutan, no country accepts INR. Indians travelling abroad have to convert the rupee into USD or local currencies.
- Value: Measured in the dollar or in gold, the rupee has failed every Indian as a store of value, i.e. as an honest, sound measure & repository of their savings & wealth.
Whether measured in US dollars or in gold, the rupee has failed India.
- It is claimed that, in 1917, 1 ₹= 13 USD.
- In 1947, when India became independent, 1 ₹= 1 USD. Today, 67.56 ₹= 1 USD.
- India imports about 800 tons of gold annually. With certain restrictions Indians can legally import gold as bullion & jewelry.
- Indians may have over 20,000 tonnes of personal gold. More than the Reserve Bank of India’s 557.7 tonnes. More than, as of April 2016, Fort Knox’s 4,582 tonnes.
Indians understand gold, love gold & save in gold.
Both gold bullion & gold jewelry can be bought by Indian citizens resident in India through gold jewelers, the MMTC & banks. The primary vehicle that Indians use to acquire gold is in the form gold jewels & ornaments.
“Indian gold jewelry demand reacts to prices; not vice-versa.” Stefan Wieler, Vice-President Goldmoney Insights
Could every Indian use gold as money?
If Indians can use gold for savings, could Indians not also use gold for payments & business transactions?
Goldmoney makes it possible for every Indian to create their own personal gold standard; for every Indian to make gold their money.
International & domestic regulatory complaint
Goldmoney operates within the international & domestic legal framework of every country that Goldmoney is available.
Unlike crypto currencies, there is no grey area with Goldmoney. Anarcho-capitalist oriented crypto, seeks to bypass the state or the national currency. Goldmoney does not. In fact, Goldmoney operates to the highest KYC/AML/ATF standards.
What if a landless labourer in Haryana can have the peace of mind in the knowledge that his gold is held under bailment (in his name)?
And that his gold holdings are fully complaint with both international & Indian law?
Frictionless account
Anyone with access to the internet can open a Goldmoney account & operate their account without any onboarding friction. Small farmers, labourers, factory workers, housewives, businessmen, executives, managers and aspiring savers are all on the same level playing field, as an urban dweller, a corporate executive or an IAS officer. Account holders may choose to have their accounts verified.
What if a Goldmoney account can be a means by which the dhan or wealth of the poor can be truly protected? Even better than what the Prime Minister’s Pradhan Mantri Jan Dhan Yojana is attempting?
Savings
Inflation defrauds the poor, more than it inconveniences the rich. Gold in a Goldmoney account protects everyone’s savings & wealth.
What if a Goldmoney account is in the same Gandhian spirit that attempts to protect the interests of the poor & underprivileged?
Transactions
Goldmoney was designed for seamless, cost effective global transactions. Transparency is baked into the cake, with real time transaction audits.
What if a rose cultivator in Nashik, Maharashtra can sell Ivanka Trump roses in Manhattan, invoice the Trump Organisation through a Goldmoney account & then get paid in gold?
Roy Sebag & Josh Crumb founded Goldmoney, a global internet based savings & payments platform that uses gold as underlying money.
Like the blockchain solved the Byzantine generals problem, Goldmoney’s patented Aurum technology has solved the gold standard’s tech problem of payment-in-transit delays. Aurum gold title settlement cycle is within seconds.
The Goldmoney platform look & feel is like PayPal, online banking, or any online transaction app. Instead of being based on a rupee or a national currency, Goldmoney uses gold as money. Everyone, everywhere values gold .
Goldmoney does not replicate the 19th century classical gold standard, but creates a fully reserved, instantly settled 21st century global gold standard for every individual & business on the planet.
Two patents (one to Josh Crumb and Roy Sebag & the other to Alessandro Premoli, Sebag & Crumb) have been awarded for the underlying Goldmoney Aurum tech. Josh Crumb, Goldmoney’s Chief Strategy Officer and Roy Sebag, Goldmoney’s CEO are co-founders of Goldmoney. Alessandro Premoli is Goldmoney’s CTO.
Goldmoney enables every Indian to have a choice of using global money running on the internet.
Will the world be more free if every Indian chooses a personal gold standard?
