Cold war on cash

India’s prime minister gets rid of the green stuff

By Mark Luedtke

World rulers have long waged a cold war on cash. The Federal Reserve [Fed] began taking bills larger than $100 out of circulation in 1969. Today, the high denomination bills that haven’t been destroyed are used by banks to transfer funds between them. No more are in production. The European Central Bank is removing €500 notes from circulation and the U.S. $100 bill is next on the chopping block. This slow process discourages scrutiny of the nefarious motives behind it.

But Indian Prime Minister Narendra Modi didn’t want to go slow. Using the typical excuse that large denomination bills facilitate crime and black markets, the formerly popular Prime Minister recently removed 500 and 1,000 rupee banknotes from circulation.

The cover story provided by the government was misleading at best. The real story is Indians, especially poor, rural ones, don’t trust corrupt governments or banks, and therefore they hoard cash, hiding it from the tax man and preventing the government from controlling them by controlling their money. Indians understand cash gives them power and freedom.

At least it did. With the stroke of a pen, Modi wiped out their savings, invalidating 86 percent of cash in circulation.

Modi planned to replace the old large bills with newly minted bills, but only after stealing the government’s cut. Financial blog Zero Hedge explains things didn’t work out as planned. “So in an attempt to overturn the existing system, one where vast amounts of wealth were concentrated in inert cash, Modi launches the biggest demonetization experiment in modern history: requiring Indians to exchange their big bills at banks for newly created ones—or suffer a quiet, potentially catastrophic financial loss—was the prime minister’s way of forcing hidden riches to the surface,” writes Tyler Durden, the editor pseudonym on the site. “There, authorities would be watching, ready to examine large cash deposits.”

But, “While millions of Indians have heeded the call and more than $80 billion in old bills have been exchanged or deposited since the Nov. 8 announcement, this is insufficient and represents just 40 percent of the value of all large rupee bills in circulation… And it is here that those who are unwilling to exchange their ‘unprovable’ cash for new banknotes, are coming up with novel ideas, and are discreetly jettisoning their cash stockpiles in more inventive ways.”

Central planning fails again, defeated by individual, innovative Indians acting in their own self-interest.

Every government intervention in the economy makes things worse, and each leads to further intervention to try and fix the problems caused by the previous intervention. So it is in India. Many Indians traded their old bills for gold, so now government’s tax men are raiding houses and stealing people’s gold. Not just coins and bullion, but jewelry, including heirlooms.

Bloomberg reports, “What this means, unfortunately, is that India’s income tax officers have just won the lottery. During a raid, they can, on the spot, decide whether or not to confiscate a family’s gold holdings. And remember, India has an enormous amount of gold—20,000 metric tons, much of it inherited… Rather than cleaning up tax administration, the government has handed tax officials more power than they’ve had for decades. The rich will pay what they need to escape harassment; the rest will suffer.”

Corruption was endemic in India before. Now, it’s off the charts, and gold is flying out of India, previously a net importer of gold.

This matters to Americans because Modi didn’t do this in a vacuum. Modi’s injustice is part of the worldwide war on cash and gold that is heating up here, too. That’s because rampant money printing has left banks worldwide worse off than ever. Any financial shock could wipe many out at the same time, worse than in 2008. The banking crisis in Cyprus in 2012 established the bail-in—banks stealing money from their depositors after authorization by government—as the favored means of avoiding bankruptcy.

But bail-ins are limited by people taking their money from banks and hoarding it in the form of cash or gold. The war on cash and gold is designed to strip that option from people so banks never have to worry about bank runs or going bankrupt again.

Besides proving again that central planning of the economy can only make things worse, Modi’s experiment also proves the value of cash is illusory, set by government fiat, but gold not only retains its value, its value increases during economic upheaval.

Bury gold to protect yourself from bankers, government, and rulers in general.

The views and opinions expressed in Conspiracy Theorist are the views and/or opinions of the author and do not reflect the views and/or opinions of the Dayton City Paper or Dayton City Media and are published strictly for entertainment purposes.

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Reach DCP freelance writer Mark Luedtke at

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