Imagine how one evening the President of the United States made a television surprise:
“Starting at midnight, I’m banning all the $ 100 bills that are now in circulation. You have eight weeks to execute. After that, they’re worthless.”
Without prior notice. No press leaks. There is no “gradual introduction” of the ban.
It can’t happen here, you say?
This happened in India last month – a country that is much more dependent on paper cash than the US (In India somewhere between 70% and 95% of all transactions are made on a cash basis. In the US this figure is close to 40%.)
Technically blitzkriegThe ban on cash by Indian Prime Minister Narendra Modi did not mean the end of major denominations. (His order banned 500 and 1,000 rupee notes, but people can exchange them for smaller denominations or new notes until the end of December.)
Big brother, in Indian
In fact, it meant the end of a large denomination currency that the government could not track on an ongoing basis.
If you read the warnings about maintaining your economic privacy, the next part will not be a surprise:
According to India Economic times, “the central bank has now asked all banks to track the movement of new bills from [banks’] currency boxes ”and“ implement a reporting system ”to track these bills as they move through the local economy.And to keep any fun business going, banks were also ordered to keep records of their security cameras for future use by the Indian authorities.
Modi’s stated goal with the cash ban was to eradicate “black money” from corruption and tax evaders. But suppose you don’t fit any of these descriptions?
Suppose you are a law-abiding citizen but do not trust the local bank. (Not a bad idea in India or the US in that regard.) Suppose you like to keep a supply of money on hand “just in case” – and you don’t understand why the government should know.
Showcase for gold ownership
That’s when our frequent advice about “gold as insurance” arises.
You turn your money into ingots and jewelry.
This is happening all over India. For example, Hindustan Times reportedly “panicked shoppers” flooded jewelry stores in the city of Indore in central India. Most stores do business early in the morning because of customer commitment.
The head of the local jewelry association said: “None of the buyers wasted time on the bidding and most of the purchases went in the form of gold coins and cookies [1-ounce wafers of gold] and gold bars. “
To date, the “cash ban” in India has been in place for six weeks, and the results are widely considered a failure:
Moody’s expects efforts to “significantly disrupt economic activity” in the world’s seventh-largest economy.
Cash shortages were common, as banks ran out of “new” bills to replace old ones that seemed to be depositors.
It is also unclear that efforts have been made to fight corruption – it has only forced corrupt, privacy-seeking “non-corrupt” people to find other ways to circumvent the government decree.
The process of banning cash
Even the amount of illegal money turned out to be less than the government’s early estimates. So far, the Indians have converted 12.6 trillion rupees (about $ 185 billion). More than 80% of these soon-to-be-banned notes were “checked,” meaning the money was legally accounted for.
What about arrests as a result of the cash ban? Authorities have not yet announced any “smoking guns” for a billion rupees. The ban did not lead any king of the underworld to vaccination or tax evasion.
And among the arrests that have been made? How India Times noted across the country there are at least six major cases where bank employees have been arrested for corruption and money laundering. Ironically, the most illegal activity falls on the sector of the economy most closely linked to “legal” money regulated by the government – the banks themselves.