As banks in India cut off access to cryptocurrencies, the government is rolling out a big brother financial grid complete with their own digital currency.
The post Fingerprints, Eye Scans Now Required To Buy Food In India, As Banks Cut Off Cryptocurrencies appeared first on The Free Thought Project.
Share prices of Indian state banks surged as the government announced it would hand over $32bn to recapitalize the sector. According to Reuters, the motivation was a bid by Prime Minister Narendra Modi to tackle a major drag on the economy that has frustrated his attempts to boost growth.
Once the world’s fastest-growing major economy, India has seen its growth rate plummet to the lowest in three years, far below levels needed to create enough jobs to absorb the million Indians joining the work force every month. Modi’s government has tried to respond by stepping up public spending, but the slowdown has stressed its finances, making it imperative that private investment picks up the slack. Officials privately admit they have struggled to revive private investment because state-owned banks, which provide much of the credit in the economy, are saddled with a mountain of bad debt…
Twenty-one state-run banks account for more than two-thirds of India’s banking assets. But they also account for a bulk of the record 9.5 trillion rupees ($145 billion) of soured loans. In addition to repairing their balance sheets, the banks need billions of dollars in new capital to meet global Basel III banking rules, due to fully kick in by March 2019. Fitch Ratings estimates Indian banks will need $65 billion of additional capital by March 2019 to meet Basel III global banking rules. Moody’s expects the top 11 state lenders alone will need nearly $15 billion.
That’s what we call a trend reversal…
Here is Bloomberg’s take...
India’s government has won a resounding reception from investors and credit-ratings firms for its unprecedented pledge of 2.11 trillion rupees ($32 billion) in capital for the country’s beleaguered state banks.
The move, which drove an index of government-run banks up as much as 26 percent, is part of Prime Minister Narendra Modi’s goal to help lenders meet tighter capital-reserve requirements, as slower economic growth and falling demand erode borrowers’ ability to repay loans. Soured debt is now the highest since 2000, hampering credit expansion that’s needed to spur Asia’s third-largest economy.
“The proposed infusion is a sizable jump over what had been pledged before as India is seeking to plug a large part of the core equity gap at the state-run banks,” said Jobin Jacob, a Mumbai-based associate director at Fitch Ratings Ltd. This addresses “weak core capitalization, one of the key drivers for our negative outlook on the South Asian nation’s banking sector.”
Moody’s Investors Service analyst Srikanth Vadlamani said the move is a “significant credit positive” for India’s state-run banks. The amount of capital pledged is enough to address the lenders’ solvency challenges and recapitalize them adequately, Vadlamani, who is vice president of the financial institutions group at the unit of Moody’s Corp., said by phone.
In the end, there was no alternative than for the Indian government to provide additional capital. While investors have shunned the state-owned banks due to poor profitability and asset quality, the situation was further complicated by the requirement for the state to maintain at least 51% ownership. Ratings agencies, Fitch and Moddy’s have been highlighting the weakness in capital ratios.
Delving into some of the details of the capital injection, Bloomberg explains, the government will sell 1.35 trillion rupees of recapitalization bonds, while banks will raise another 760 billion rupees through “budgetary support” and from the markets, according to the plan announced Tuesday. The funds vastly outstrip the 700 billion rupees that India had pledged two years ago to inject by 2019, and is likely a recognition that the government had underestimated the impact ballooning bad loans would have on credit growth…
“These funds will help in efficiently managing risk and credit capital-related requirements of the banks,” State Bank of India Chairman Rajnish Kumar said in an emailed statement.
Bloomberg summarised market reaction in stream of consciousness fashion.
Analysts say the step is “sentimentally positive” and will help lenders meet over 70% of their capital needs but lending won’t grow immediately. Punjab National Bank jumps as much as 40%, most on record; Bank of Baroda surges as much as 29%, State Bank +25%. Recapitalization amount is “huge,” will help banks meet higher provision requirements under new accounting rules starting April 2018 Citi (Manish Shukla, Abhishek Sahoo) Timely recapitalization of government banks will boost capital adequacy, even after they make provisions for soured loans However, private sector demand -- muted over past few years -- has to revive for loan-growth to recover CLSA (Aashish Agarwal, Prakhar Sharma, Aditya Jain) Plan should help satisfy more than 70% of lenders’ needs required for lending to increase, absorb “haircuts” on stressed loans Punjab National Bank, Union Bank raised to buy from sell JEFFERIES (Nilanjan Karfa) India plan is “sentimentally positive” and makes all state banks “a basket trade” Bank lending won’t improve immediately, but it “partially solves” supply of capital flow; stoking demand needs to be worked at separately MORGAN STANLEY (Anil Agarwal, Sumeet Kariwala, Subramanian Iyer) State lenders can now “take the required hits” arising from soured loans, make proper provisions, and move ahead Insolvency rule was helping bad-loan resolution, recapitalization will accelerate it NOMURA (Adarsh Parasrampuria, Amit Nanavati, Riddhi Jain) “Big state banks recap” is a game-changer; expect re-rating in state-owned banks Infusion “highly dilutive” but very positive for FY19 adjusted books
As ever, you can’t please everybody as Reuters noted...
Mohan Guruswamy, an economist in New Delhi, said the government should have taken action three years ago to revive the banking sector. "Now it"s more expensive, and we will not see results soon," Guruswamy said.
One day after the most anticipated Apple product launch in 10 years, several problems have emerged for the much hyped iPhone X, face-recognition demo flop notwithstanding: it will be substantially delayed confirming all earlier reports of supply-chain bottlenecks, and it will be expensive, perhaps prohibitively so. The introductory prices of the iPhone 8 and the iPhone 8 Plus have gone up compared to the prices of the iPhone 7 and the iPhone 7 Plus. The iPhone X, meanwhile, will price in the 4 digits well equipped. Addressing this issue, the WSJ has a front page article titled "Apple’s New iPhones Gamble on Allure of Premium Pricing."
In one place that gamble may prove insurmountable. As India Today writes, when it goes on sale in India on November 3, the iPhone X will cost Rs 89,000 for the 64GB version. The top-end variant with 256GB is going to cost Rs 102,000. "In other words, this is one expensive phone, although you can say that the iPhone has always been expensive."
To demonstrate just how expensive, on a purchase price parity basis, the iPhone X will be in India, India Today writes that "the other thing that you can say about the iPhone X is that it is cheaper in some other places. As it always happens, the market where the iPhone X is going to be the cheapest is probably Hong Kong."
In fact, the iPhone X is so expensive in India, and so cheap in Hong Kong, that you can go Hong Kong, buy the phone, and come back and yet save some money. And this includes the cost of flight ticket to Hong Kong. Just see the math."
iPhone X (256GB) in India: Rs 102,000
iPhone X (256GB) in Hong Kong: Hong Kong Dollar 9,888. This means using the current exchange rate, in Indian currency the price is Rs 80,999.
What does this mean? It is cheaper to go to Hong Kong and buy the iPhone X 256Gb variant there.
The iPhone X will be available from November 3. Now, if you book your flight to Hong Kong today, the cheapest flight in the first week of November that you can book from Indian will cost around Rs 20,000. If you book a flight from Kolkata, you can get a return ticket to Hong Kong for little over rs 17,000. From Bangalore it is around Rs 19,000. From Delhi, around Rs 20,000. From Mumbai it is a little more expensive.
Flight ticket: Air Asia Rs 17,800
iPhone X 256GB: 80,999
Some other expenses: Around Rs 2000 to Rs 3000
Total: Around Rs 1 lakh
Money saved: Around Rs 2000
The report"s conclusion:
Now, we know the whole thing sounds like a joke. And in a way it is. No one is going to go specifically to Hong Kong from India to buy the iPhone. Also, it works best with the 256GB variant. But it does show the ridiculousness of the iPhone prices. and particularly the iPhone X prices, in India. Is it because Apple can"t price the iPhone any cheaper? Is it because Apple wants big profit margins? Is it because of Indian government taxes? Is it because Apple wants to keep the iPhone prices high so that it continues to a status symbol in India? We don"t know. Only Apple can answer these questions, if it wishes to answer them.
For now Apple is ignoring these, and various other pressing questions - including the whole animated poop emoji. Overnight Doug Kass released the following assessment of why this time Apple may have gone too far:
Apple continues to deliver an expensive smartphone relative to its peers, with many features that are already available from its competition and most of which were anticipated, including face recognition, a full-screen interface and no home button.
The only exception to reality versus anticipation was the later-than-expected availability, which is toward the end of the year (orders will be accepted on Oct. 27 and deliveries are slated for Nov. 3). As a result, analysts could take 3 million to 4 million iPhones out of their December quarter projections and reduce full-year 2018 estimates by about $0.40 a share.
However, the new Apple phone will provide an animated poop emoji so you can talk crap to your friends.
The starting price for the 64GB model of the iPhone X is $999 and $1,149 for the 256GB model. The Apple smartphone continues to be a high-priced aspirational product accompanied by a remarkably effective marketing effort that is stretching its status symbol appeal. However, I see little incremental to the latest product offerings, leaving room for disappointment relative to optimistic expectations. (It is why I initiated an Apple put position yesterday morning and added to that position when the stock was up $2 early in the afternoon).
The expectations of an Apple replacement super-cycle accompanied by higher unit volumes and much higher average selling prices, leading to expectations of a "hockey stick" of earnings growth in the coming fiscal year coupled with a general confidence in sustainable growth from there, have spurred a rise of more than 50% in Apple"s one-year forward price/earnings multiple in the last 1 1/2 years.
I clearly have underestimated the strength of and the confidence in the Apple franchise over the last year. Recognition of this has led me to maintain more of a trading-oriented short position, whereas years ago I had more of an investment short position, which proved successful. Nevertheless, I continue to believe that these aggressive "going forward" expectations for Apple and the company"s current valuation remain too ambitious.
But the biggest threat facing the iPhone and perhaps the entire Apple business model, is if its products are no longer perceived as the pinnacle of "coolness." And while it is too early to conclude either way, following yesterday"s disappointing and badly leaked release, many appear to be taking aim at Apple not as the source of brilliant Steve Jobsian innovation and "hipness", but as the target of mockery, scorn and humor. Indeed, as one readers suggested, "The bloom may be coming off the rose. Even folks in the twittersphere piling on. In the past there was such a halo around apple, nobody would make fun of them. Now it seems the opposite."
Iis the idol worship coming to an end? According to these widely publicized reactions to the iPhone release, the answer appears to be yes.
Authored by Ivan Eland via The Strategic Culture Foundation,
During his campaign for the presidency, Donald Trump touted his nationalist “America First” foreign policy, which implied that he wanted to stay out of foreign brushfire wars. Even before that, he tweeted his disapproval of American involvement of the Afghan War.
The photograph released by the White House of President Trump meeting with his advisers at his estate in Mar-a-Lago on April 6, 2017, regarding his decision to launch missile strikes against Syria
Yet now he has delegated the authority to his Secretary of Defense to send several thousand more troops to Afghanistan to join the almost 9,000 that remain there advising and assisting Afghan forces and hunting Islamist terrorists. And that is not the only instance in which the Trump administration has gone against his original inclination or is contemplating it.
Trump appears to be delegating the troop re-escalation decision for Afghanistan to Secretary of Defense Jim Mattis, because the president wants to be able to dodge responsibility in case that policy is ultimately unsuccessful, just as he blamed the botched Special Operations raid in Yemen on the military. Re-escalation is likely to fail, because the administration has no strategy for turning the already-lost conflict around. Adding 3,000 to 5,000 troops, according to a U.S. military that never wants to admit losing a war, would allow American troops to “advise” Afghan troops in battlefield areas, instead of remaining at higher headquarters, and also to call in U.S. air and artillery strikes in support of those local forces.
Yet the Afghan War is the longest conflict in American history, and no conception of “success” can be realistically imagined. How can an augmented force of 13,000 or 14,000 American advisers have success helping a still pathetic Afghan military (even after 16 years of U.S. training), when 100,000 much more potent U.S. combat troops could not defeat the Taliban during all those prior years of conflict?
And if the Taliban’s gains on the battlefield aren’t enough, the continued U.S. military presence in Afghanistan has caused some Islamist militants to pledge allegiance to the even more radical and brutal ISIS group. One can easily see that when the 3,000 to 5,000 troops have little effect on the battlefield, which is the probable outcome, the military will begin demanding a more sizeable re-escalation of the endless conflict.
Should we give the U.S. military a blank check for perpetual war until it comes up with a face-saving way to exit with honor? Such a ruse didn’t fool anyone in the Vietnam War.
The original U.S. enemy, Al Qaeda, is already a spent force in that part of the world. In addition, the Indian government is assisting Afghanistan economically and Afghan forces militarily and would have an incentive to do much more if the United States withdrew from the fight. India doesn’t want its arch rival Pakistan’s support of the Taliban insurgents in Afghanistan to result in a Taliban-controlled or influenced Afghan government that will augment Pakistan’s power in the South Asian region. Thus, the United States could let India, which has greater strategic interest in this local war than does the United States these days, take over countering the Taliban and ISIS in the region.
Army CH-47 Chinook helicopter pilots fly near Jalalabad, Afghanistan, April 5, 2017. (Army photo by Capt. Brian Harris)
In addition to re-escalating an already unsuccessful Afghan War, some in the Trump administration want to ramp up the fight in Syria and assistance to the Saudi Arabian-led coalition against the Houthi rebels in Yemen, who are loosely aligned with Saudi-rival Iran.
Trump, seemingly only to prove he was tougher than President Obama was in Syria, mounted a for-show cruise missile attack on a Syrian air base after an alleged chemical weapons attack by the Bashar al-Assad regime. Before the U.S. attack, the Trump administration warned the Russians and the thus the Syrians that it was coming, thus severely mitigating its effect.
Lately, however, some in the Trump administration want to widen the war against ISIS in Syria to include Iranian-sponsored militias that are also fighting ISIS. Yet the perils of escalation in Syria became apparent when a Syrian government plane dropped bombs near U.S.-sponsored rebels, U.S. aircraft shot down the plane, and then the Russians declared that any American aircraft flying over Syrian government-controlled areas would be tracked as potential targets. Russian downing of an American aircraft or vice versa would be an unneeded and dangerous escalation between two nuclear-armed great powers over the outcome of a civil war in a country that is not strategic to the United States.
The desire of some Trump administration officials to go after Iranian-sponsored militias in Syria is part of a larger Trump inclination to support Saudi Arabia in its regional rivalry with Iran in the Persian Gulf. That regional rivalry is also playing out in the destitute country of Yemen, with the United States selling the despotic Saudis a fresh batch of expensive military equipment, some of which will probably be used to kill Houthis in Yemen, including lots of civilians. Yet if Syria is not strategic to the United States, the poor nation of Yemen is certainly not either.
In the Syrian civil war, the United States should sit back and watch its adversaries fight each other — ISIS and other radical Sunni Islamists versus Iran, Iranian-sponsored militias, the autocratic Syrian government, and Russia.
In the internecine conflict in Yemen, the Saudi coalition, which has already killed many civilians, is hardly better than Iran.
In the Afghan civil war, the United States should accept defeat, withdraw its forces — instead of re-escalating the war — and let India fully take over assisting the Afghan military in its fight against the Taliban and ISIS.
In sum, Trump should avoid getting co-opted by the U.S. military and honor his campaign rhetoric, which implied staying out of non-strategic brushfire wars.
Authored by Brian Cloughley via The Strategic Culture Foundation,
The disputed of territory of Kashmir, lying in the north of the sub-continent between India and Pakistan, does not often feature in the world news media, but recently the little-known yet most sensitive region has received attention, not only because of boundary clashes between the armies of India and Pakistan but because there have been some dramatic incidents in the Indian-administered region. Tension is rising, as indicated by comments from politicians and media in both countries, which have been swinging from casual abuse to extremes of frenzied condemnation.
The Vishva Hindu Parishad (VHP) in India is a right-wing, religiously-based ultra-nationalist political party with a large following which actively supports the ruling Bharatiya Janata Party, which bases its policies on the aspirations of a strongly nationalistic community. The leader of the VHP, Acharya Dharmendra, declared in a speech on June 2 that «India should drop a nuclear bomb on Pakistan for creating tension at the border. It is a rogue nation and India must teach that country a lesson. It is important for peace in the Indian subcontinent».
So far as can be determined, no Pakistani politician has yet made such a statement, publicly, at least, but the feeling in Pakistan as regards the use of nuclear weapons is much the same as in India: very many citizens of both countries believe that nuclear weapons just make a bigger bang. This is worrying, to put it mildly, especially as these two well-armed nations are squaring up to each other over the Kashmir imbroglio.
Before India and Pakistan became independent in 1947 there were some 560 feudal rulers of princely states, of which Kashmir was one of the few in which a Muslim majority were subjects of a Hindu maharajah. He decided to accede to India but the territory continued to be disputed between India and Pakistan, and remains in such status on the books of the UN Security Council.
The main UNSC resolution about Kashmir is 122 of 24 January 1957. It reminds the governments of India and Pakistan that «the final disposition of the State of Jammu and Kashmir will be made in accordance with the will of the people expressed through the democratic method of a free and impartial plebiscite conducted under the auspices of the United Nations».
India has tried for many years to convince the world that the 1972 India-Pakistan Simla Accord following their war of 1971 in some way invalidates UN Security Council resolutions regarding Kashmir. But the first paragraph of the Simla Agreement is «that the Principles and Purposes of the Charter of the United Nations shall govern the relations between the countries». Then it states that «the two countries are resolved to settle their differences by peaceful means through bilateral negotiations or by any other peaceful means mutually agreed upon between them» [emphasis added]. It is obvious that, contrary to Indian claims, there is no legal exclusion of the UN or any third party from mediation over Kashmir, given the covenant to include «any other means» towards settlement.
India, however, seized upon its selective interpretation of the wording of the Accord to unilaterally forbid the UN Military Observer Group in India and Pakistan (UNMOGIP) to carry out its duties to «observe and report» on both sides of the line of Control dividing the disputed territory. That Mission has forty uniformed observers who investigate cease-fire violations on the Pakistan side, but are not permitted to operate in Indian-administered Kashmir. This state of affairs neutralises objective UN reporting about the region, and one has to ask the question : who benefits from that?
Indian-administered Kashmir is a scenically beautiful region which is economically self-supporting by virtue of food production, tourism, and export of world-class handicrafts — carpets and papier-mâché and carvings. Its citizens desire only fair governance, but over the years have become increasingly alienated from the Indian mainstream, and the recent increase in anti-India violence in the Valley is an indication of infuriated frustration. The insurgency has settled into a grumbling resentment with occasional outbreaks of forcefulness, and some barbaric incidents such as the recent unforgivable murder of a young man.
On 9 May 2017 a young Indian army officer was kidnapped and murdered. He was aged 22, recently commissioned, unarmed, and home to attend a family wedding in Indian-administered Kashmir when five men burst into his father’s house and overpowered him, took him away and shot him dead after treating him despicably.
Lieutenant Ummer Fayaz was an enlightened Kashmiri from a humble background who had made good because he was intelligent and hard-working. He was, of course, a Muslim, which made him doubly vulnerable to those evil fellow-Muslims who killed him. Their achievements were to plunge a family into grief, deprive the world of a good upright citizen, spread even deeper hatred throughout India, and demonstrate that they were vile savages who murdered a defenceless man. These reptiles are not freedom fighters. They are simply murderous criminals who lack any sort of morality and possess not a shred of compassion for their fellow human beings.
Which brings us to the treatment of another young man, Farooq Dar, a Kashmiri not much older than Lieutenant Ummer Fayaz, who survived to tell his tale, but also suffered at the hands of brutal bullies who had no fear of justice being applied.
According to the Economist, a reputable publication with no axe to grind in the India-Pakistan imbroglio over Kashmir, Mr Farooq Dar «suffered a severe beating» by Indian soldiers and was then «tied up on a spare tyre attached to the front bumper of an armoured jeep. Indian soldiers claimed he had been throwing stones. Mr Dar was driven in agony through villages... The soldiers reckoned the sight of him would deter others from throwing stones at their patrol».
By far the majority of the citizens of Indian-administered Kashmir who object to draconian Indian rule in the disputed territory are peaceful and want matters to be resolved politically, in accordance with Security Council Resolutions, but some have resorted to barbarism, and unfortunately the Indian army and paramilitary forces have lowered themselves to the level of the extremists. The use of pellet-firing shotguns to deliberately blind protestors was particularly malevolent, but in line with the recent statement by India’s army chief that «This is a proxy war and proxy war is a dirty war. It is played in a dirty way... You fight a dirty war with innovations». Like blinding people. The Indian Express reported that after one demonstration in 2016, doctors performed nearly 100 operations on people with pellet gun injuries. Sixteen had been blinded. Welcome to free Kashmir.
As Human Rights Watch observed, «a major grievance of those protesting in Kashmir is the failure of authorities to respect basic human rights», but the whole Kashmir catastrophe is about human rights, and it is time India and Pakistan devised a solution about the disputed territory. Countless lives would be saved if these governments eschewed the crude and dangerous attractions of ultra-nationalism and agreed to settle the dispute by referring it to independent arbitration. There is no possibility that India would ever agree to surrender the territory it occupies, because no Indian government would survive five minutes after making such a decision. Pakistan must live with the unpalatable fact that it has lost the territory and must make the best compromise.
At this moment the disagreement between India and Pakistan over Kashmir is one of the world’s most dangerous confrontations. It could only too easily lead to nuclear war, given Pakistan’s preparedness to use tactical nuclear weapons if Indian forces penetrate Pakistani territory, as they will probably do if there is a major fire-exchange incident along the Line of Control.
Then there will be a world catastrophe, because there is no such thing as a limited nuclear war.
The Line of Control in Kashmir should be declared the international border, with minor adjustments effected after independent mediation. Prime Minister Narendra Modi of India and Prime Minister Nawaz Sharif of Pakistan should meet and declare that the Kashmir imbroglio is over, and that the countries have agreed to go forward to mutually beneficial cooperation.
Then they could go to Norway to accept their Nobel Peace Prizes.
Authored by Jayant Bhandari via Acting-Man.com,
Over the three years in which Narendra Modi has been in power, his support base has continued to increase. Indian institutions — including the courts and the media — now toe his line.
The President, otherwise a ceremonial rubber-stamp post, but the last obstacle keeping Modi from implementing a police state, comes up for re-election by a vote of the legislative houses in July 2017. No one should be surprised if a Hindu fanatic is made the next President. India is rapidly entering a new phase.
Indian Prime Minister, Narendra Modi on the cover of an Indian magazine in 2002, when he was the Chief Minister of the Indian province of Gujarat. During his reign in Gujarat, a civil-war like situation erupted, which seriously segregated the province’s society. It brought Hindus into a state of trance and excitement and provided them with the fake-security of the collective. Alas, wealth and civilization are created by an intense focus on value-addition, not from the short-term escapist excitement of mobs expressed through riots and rape. Destructive endeavors are a major vulnerability of poor societies, given their irrationality and lack of foresight and planning, and their short-sighted focus on high time-preference, pleasure-centered activities.
Modi, a major world-traveler, who has run around quite a bit to please foreign governments and win the support of identity-lacking non-resident Indians, is no longer going abroad with the same abandon. Historically and even today, whatever gained approval in the West is what Indians have looked up to.
But Modi has matured. Modi has directed the attention of Indians to nationalism, Hindutava (fanatic Hinduism), the army, the flag, the anthem, and other superficial collective “causes” not underpinned any values or wealth-creating, civilization-producing objectives. Behind this is an empty arrogance pumped up by having grown relatively richer (still with GDP at a mere $1,718 per capita) over the last several decades due of the free gift of western technology.
If all this reminds you of the early days of the Arab Spring, you are right on track with respect to understanding what is happening in India. India is an extremely irrational, superstitious and tribal society, which I have discussed in great detail in earlier articles, the last one of which is linked here.
Modi has infused so-called educated Indians with a sense of confidence and identity. It does not matter that this is all fake. To a man with a tribal, irrational mind incapable of thinking about tomorrow, throwing furniture onto the bonfire is not a problem, for today’s excitement is all that matters. Lacking empathy and compassion — another tribal “quality” — he pays no heed to the suffering of his fellow man.
It seems possible that Modi is focused on the wrong statistics [PT]
In the deeply irrational society of India, the institutions of liberty that the British left behind were slowly but surely hollowed out. That had to happen, as the glue and the foundations of reason needed to sustain these institutions do not exist in Indian society. The tribal instincts of Indians are diametrically opposed to the concept of liberty. The concept of free speech, a remnant of the intellectual climate fostered by the British, survives for a small fraction of society – but even that is receding rapidly.
Compared to what happened elsewhere in South Asia, the Middle East and Africa, India was — on a relative basis — a beneficiary of its ethnic diversity. This diversity ensured that a collective approach to destroying institutions of liberty and the rule of law worked only slowly, due to infighting.
Isn’t it racist to call Indians irrational? Political correctness has indeed made people come to believe that we are all blank slates, which merely need to be reprogrammed through training. The reality has been quite different, as our everyday experience in this globalized world shows. Cultures are so resilient that even after people from these poor societies have migrated to the West, they not only fail to assimilate but more importantly, often regress.
Modi’s focus is on centralizing Indian society, increase the State’s control over the individual, increase taxes and compliance, and force people’s attention on collective goals. The tribal instincts of Indians are finally getting the upper hand, as the institutions left by the British come to the end of their lives. India’s chaos means that its totalitarianism will not be like that of Nazi Germany, but similar to that of Zimbabwe.
Modi’s totalitarian agenda also finds support among the IMF, the World Bank and the similar globalist institutions, which appear to be rather simplistic in their thinking. There is a strong belief among these institutions — as they lack understanding of the differences between cultures — that what works in the West must also work in India and other wretched societies.
That may have been possible as long as the British ran India. Without them, fragmentation of the unnatural nation-state of India, or at least aggressive decentralization is the only practical option.
In India where an organization of two people has one person too many, the forced centralization that Modi is undertaking is bound to lead to massive chaos, civil war, turmoil, and the eventual disintegration of India into its tribal constituents. India has chosen a painful path to revert to its tribal normal.
Colonization by the British was the best thing that happened to what came to be known as India. Without the sanity provided by British supervision or the institutions left by them, Indian tribes will forever be engaged in a war of attrition against each other.
Yogi Adityanath, a Hindu fanatic and the new Chief Minister of Uttar Pradesh, the most populous province of India, distributing goodies, while security personnel restrain citizens from throwing themselves at his feet – a favor citizens gratefully bestow, and those in any kind of power expect. Does anyone really think India is “independent” or “democratic”?
Will digital technology alleviate their pain and drudgery? Or will it actually make it worse? (Photo credit: P. Sainath, whose work exposes the suffering of the otherwise invisible poor people of India)
On 8th November 2016, Modi declared 86% of the monetary value of India’s outstanding currency illegal. Even today, ATMs remain cashless. The banks are clogged with throngs of people. Small businesses — the backbone of India’s economy — keep failing, because people continue to avoid discretionary spending.
People have suffered economically as the smooth flow of the economy was disrupted, and transaction costs for businesses have increased. Food prices have recovered a bit recently, but are still at about half their previous levels. Unfortunately, this is not because production has increased, but because demand has collapsed, with many of the poorest people likely unable to buy food.
A sign adorning the entrances of banks in India with depressing regularity.
Photo credit: Ajay Verma / Reuters
India is one of the countries with the highest traffic-related deaths in the world. This happens despite its slow-moving traffic. India has been an utter failure in providing basic government services. Ambulances are often not available at all, or if they exist they are used for the private purposes of those in authority.
In the rare cases when they do arrive, it takes them forever and even then they almost never have paramedics. They often refuse to take the injured to a hospital unless a close relative goes along. The hospitals are either ill-equipped or disinterested in taking such patients if they are not accompanied by a relative.
If one is incapacitated in an accident for any reason, the chances of getting emergency aid are extremely low. One is quite likely to simply die on the roadside. The situation is similar with the police and other emergency service providers.
The Indian government completely fails at its most important job. Indians simply do not have the capacity (given their irrationality) to build and maintain such basic organizations. This happens even when they spend massive amounts in order to maintain such organizations.
India has almost never undertaken a big project and completed it. None of this has discouraged the dreamer Modi. The demonetization effort, in which the government merely had to replace old notes with new ones, has been an utter failure. It is an ongoing pain which has left the economy in shambles, despite the rosy growth figures reported by the government.
Asian bureaucracies compared: a score of 10 is the worst possible (it means your country is drowning in red tape and corruption). India has a score of 9.21 – making it a world leader in red tape. [PT]
Over a billion people in India have no access to internet. When it is available, it is often very slow. Electricity is unreliable. Bank websites are extremely unwieldy. To make an online transaction, the login process is usually very complicated, often requiring several steps and verification codes sent as text messages.
More than a month ago, I paid online for a flight ticket from Delhi to London. The money left my account, but I never got the ticket. It was virtually impossible to get in touch with the Indian company I had bought the ticket from. When I did finally manage to contact them, they told me that they had refunded the money. The bank says it never got the refund. Of course, I have had to personally visit the bank every time and spend a long time waiting to talk to someone. In this electronic day and age, more than a month after the event, no-one knows where my money is.
It is hard to pinpoint who deserves the blame. Indians are extremely unskilled, uneducated (despite paper certificates aiming to prove otherwise), and lack work ethics. They almost never have passion for their jobs or an interest in providing good services to their clients. This is the main feature characterizing many Indian companies. Management and owners lack professionalism and are singularly focused on the bottom-line, by hook or by crook, eschewing true value-addition.
And then a discovery was made amid the rubble and the ruins – let’s focus on that… [PT]
I know many people who refuse to use an ATM card. People refuse to make credit or debit card transactions, as they cannot trust the system. Many years ago my Indian credit card company refused to reverse an unauthorized charge. When I asked them to cancel my card, they upgraded my card and imposed a yearly fee. I had no choice but to stop making payments to end a never-ending cycle of problems.
Given the risks involved, many people simply walk down to the bank branch to make an online transaction, which obviously defeats the whole purpose of going digital. When Indians buy something online, they tend to use the “cash on delivery” option, a unique option for buyers in India, where people have no work ethics or trust in each other.
Both the lack of trust and the lack of digital infrastructure are reflected by the fact that 98% of all consumer transactions in India are carried out in cash. Yes, banning most outstanding cash currency was probably a tad disruptive… [PT] – click to enlarge.
Virtually anyone one meets in India is perplexed about the charges banks impose on accounts these days. There are non-agreed fees and commissions that appear regularly, and on top of those, service taxes are charged. There are tens of charges which no one knows the reason for or is able to explain.
Bank employees favor you with a blank stare when you ask them for an explanation. Even Modi fans finds themselves boiling in anger when their bank statements arrive.
India’s attempt to go cashless will fail. India’s e-commerce companies will fail. The skills and ethics required to run big organizations simply do not exist in India. In the meantime, the forceful imposition of cashless transactions will only succeed in imposing massive costs on society.
There has been much talk about the newly imposed national ID system, Aadhaar, and the GST system that is expected to be rolled out in a few months.
Errors are an all too common feature of digital India. Aadhaar is used for purposes it was allegedly not intended for.
Aadhaar will fortunately not lead to a Nazi-style police state. India is too chaotic and undisciplined for that. India will be a Zimbabwe-style police state. The stated purpose of Aadhaar was to provide assistance to the poorest people in society. You often see them sitting outside bank branches, begging to get the equivalent of a few dollars that are due to them, for the money often isn’t in their accounts or simply untraceable.
Mistakes and disappeared money that should be highly unlikely happen all the time in India, as the kind reader by now surely understands, given India’s cultural underpinnings. Data breaches and leakages from the Aadhaar system are becoming everyday news.
Even in a perfect system, which is anyway not possible, Indians will still engage in data breaches for bribes, etc., as they simply do not have respect for their own professions or pride in what they do. Despite the fact that it is unconstitutional, India’s government is making Aadhaar compulsory for filing tax returns, using government services, salary payments, etc.
A rather perceptive cartoon about the Aadhaar card. In the meantime India’s Supreme Court has ruled that Aadhaar cannot be made mandatory. The government seems set on ignoring this ruling and is pressing ahead with the scheme anyway. [PT]
India’s much talked about GST system is to roll out in July. GST will impose a massive need to create audit trails. The simple movement of a good by a transporter to someone’s house will require an electronic document to be produced. Couriers who have so far not had any involvement in this process will be entrapped. Similar e-way bills will have to be created as goods moves from couriers to trucks or change hands in any other way.
These documents will have limited validity, so if a person has a possession of a good for more than a certain time while it is in transit, a new e-way bill will need to be created. Any movement of inventory within the same company will have to be documented and filed. Even very small companies will have to file three documents every month and another document every year.
No one knows for sure how GST will be implemented. I doubt that the government itself actually knows it — in fact, of course they don’t. It will definitely create a new wave of chaos and many aspects will likely need to be reversed.
India has a serious skills shortage. Indian companies can e.g. not find skilled accountants. Most will find the costs associated with implementing such a rigorous system far too high anyway. Increased demand for tax officers and accountants will reduce the pool of workers available for productive activities.
India’s attempt to go digital will fail. Digital cash will fail. E-commerce companies will fail. In India, the national ID-card system, Aadhaar, will fail. The GST system will likely fail, or it will at least create massive problems in implementation. All these programs will impose huge costs on the economy and the well-being of entrepreneurs, including the wretched poor in the large informal economy.
India is looking for totalitarian solutions to deal with problems created by totalitarianism and tribalism. India is trying to use the the facade of the technologically advanced West hoping that the packaging will automatically deal with the lack of inner substance. Fail even with respect to superficial issues seems preordained
India’s government cannot provide basic services to its people. Ambulances are conspicuous by their absence. But Modi wants to move on to doing bigger things. In the last 70 years of independence, Indians have systemically destroyed the institutions of the rule of law that the British had bestowed on the country.
Cash is king in India, in every respect – click to enlarge.
There is a lot of pain and no gain facing India. If they had any sense they should be begging the British to return and rule the country. That is the only option apart from chaos, disintegration, and eventual never-ending tribal infighting among the fragments.
Authored by Jayant Bhandari via Acting-Man.com,
This is Part XI of a series of articles (the most recent of which is linked here) in which I have provided regular updates on what started as the demonetization of 86% of India’s currency. The story of demonetization and the ensuing developments were merely a vehicle for me to explore Indian institutions, culture and society.
The Modimobile is making the rounds amid a flower shower. [PT]
Tribal cultures face an inherent contradiction. They create poison from within to grow more collectivist, controlling and tyrannical — members of the populace looks for nannies, and they readily find sociopaths to exploit that need. Their lack of organizational skills, their inability to engage in economic calculation and their irrationality lead to massive internal stresses and the ultimate devolution of such an unnatural society.
India finds itself in a situation where it is grasping for more totalitarianism to solve the problems that totalitarianism created. The demonetization exercise was an assertion of India’s underlying tribal and collectivist culture.
Cashless ATMs continue to be the new normal in India. In a recent conversation, economist Professor Madhusudan Raj mentioned that as many as 70% of the ATMs in his city are still not operational. The situation in villages and small towns is much worse. Banks are often clogged with people.
Eventually most people who must have cash will get it, but businesses need easy access to large amounts of their own cash without incurring transaction costs. They continue to face horrendous problems, which are translating into closures, retrenchment of staff, and bankruptcies. The tax authorities are getting increasingly rapacious. According to Professor Madhusudan Raj:
“The tax department is busy conducting raids on old widowers, small traders and merchants like chicken-shops, shoe-shops, small restaurants, gas stations etc.; pretty much anyone who deposited more than half a million rupee in banks during the demonetization process. The department is forcing small traders to declare income under Modi’s PMGKY (Prime Minister poverty alleviation) scheme, but leaves big corrupt business tycoons untouched.”
Draconian regulations on the use of cash are increasing. Businesses are in fear of the State. Freedom of speech is rapidly receding, not only because of fear of the government, but also because Indians are becoming increasingly fanatic.
Any new cash continues to find its way to the financially powerful, leaving small businessmen and the informal sector reeling in economic trauma. The normal rhythm of the economy has been destroyed. People continue to delay discretionary purchases. The market continues to be slow.
Businesses are failing and the poorest are finding employment very difficult to come by. Food prices are still much cheaper than normal, as a result of the economic struggles of poor people. Farmers are facing huge financial pressure in turn.
It is a vicious cycle in which people who at first lacked access to their own money because of the demonetization now face a situation in which they simply don’t have any work and hence no cash.
From the Hindu newspaper: Only three out of forty-five ATMs in the IT-hub city of Hyderabad were functioning on 13 March 2017. Businesses are starving for cash.
As is the case with an irrational tribal society, many members of India’s middle class are utterly lacking in empathy for those who are suffering. Slowly but surely, universal principles assert themselves though, and economic harm is flowing toward them. Alas, they still fail to recognize the chain of causality.
The slow poison of demonetization and populist scams schemes at work: US-listed IT-major Cognizant is expected to slash more than 10,000 jobs. It has around 260,000 employees and around 75 percent of its workforce is based in India. The situation of other IT companies in India is similar. A huge wave of young, mostly unskilled, untrained and uneducated people – about 12 million – join India’s workforce every year, but have little prospects of finding a job.
It has been 70 years since the British left India. In these years, Indians have systemically destroyed what the British left behind by asserting their tribal, superstitious and irrational culture.
It was believed that the separation of legislature, judiciary and executive which the British had created would stay. What was forgotten was that such institutions had evolved in Europe because of the tool of reason. Indians imported all the fruits of western civilization — technology, music, movies, Kim Kardashian, etc. — but completely failed to adopt the European concept of reason.
Without reason, India had to drift back to its tribalism. Today, Indian institutions are hollow shells of what was bequeathed by Britain. The executive, the judiciary and the legislature are indistinguishable from each other. One would find it almost impossible to come across even an educated Indian able to properly explain the difference between these three branches of government.
As Professor Madhusudan Raj notes:
“There is a big cold war going on between the Supreme Court and the Modi government, which is trying to take full control of the courts. Modi’s parliament can now dismiss the appointment of Supreme Court judges in the name of ‘national security’.”
When the British left India, virtually all leaders had been selected and nudged into their positions by them. India was a democracy only in name. Children of these leaders and later on their children had political power.
Jawaharlal Nehru was India’s first Prime Minister. Then it was his daughter’s turn, Indira Gandhi. And then it was the turn of her son Rajiv Gandhi. And then Rajiv’s wife, Sonia Gandhi took over (she ruled using a puppet, Manmohan Singh).
The last vestiges of whatever class Indian politics might have had ended along with the end of Sonia Gandhi’s rule three years ago, and the subsequent inauguration of Narendra Modi. Now raw tribalism is in full force in India.
It is not only India that is affected. European institutions have failed and mutated into entities catering to underlying tribalism in nearly every country in Africa, the Middle East, South Asia and most of Latin America. The nation state, a European institution, is too unnatural for these societies.
India seemed like an exception to the international media. This is because the smartest people of India moved to the US and Indian lobbies leveraged this fact to make India look good – despite the fact that India’s per capita GDP of $1,718 is worse than that of most well-recognized banana republics.
There has indeed been one good thing about India though: freedom of speech survived among a minority. This happened not because of any inherent goodness, but because India is an extremely diverse place, perhaps the most unnatural country.
The infighting and stresses it generated have failed to given Indians a collective identity. This cirfcumstance allowed a minority to speak its mind. Alas, even that is now coming to an end. Hindu nationalism, a.k.a. Hindutava, is rapidly weaving Indians into a tribal collective.
The international media and the World Bank, find inspiration in what is happening in India. India has recently released a GDP growth figure of 7%. India’s new identity card scheme, Aadhaar, is believed to be a massive success, so much so that the World Bank is urging the world to copy it.
The Indian stock market has risen nicely over the last few weeks. So has the Indian rupee. Moreover, Narendra Modi’s party has just celebrated massive victories in recently held provincial elections. What is not to like about India?
“The Aadhaar system is the most sophisticated identification program in the world,” says World Bank economist Paul Romer [100 crore = 1 billion] – click to enlarge.
In my last update, I explained why the 7% growth figure is a mere paper figure not reflected by reality on the ground. India’s economy very likely suffered huge negative growth last quarter. An increase in revenues was only experienced by politicians and bureaucrats, who collected larger bribes than ever. The common man no longer has the courage to haggle over bribes these days. He pays whatever he is asked to pay.
Ironically, Modi gave the common man and particularly so-called educated people in India huge hopes, and not unlike people in North Korea, they are increasingly nationalistic and proud. 93% of the population have indeed signed up for the Aadhaar ID. It is not compulsory to have one, but the Indian government has made it impossible not to have one. People who don’t have these cards are simply opening themselves up to getting exploited in new ways.
It is worth visiting banks when so-called pensions — paltry sums of a few dollars — are coming due for the old and infirm. They grovel and sit for hours outside bank branches, consistently humiliated by everyone, from guards to managers. In this electronic age their pension often goes missing. Then they must run from pillar to post to get what they have been promised.
India’s GDP per capita is $1,718, making it poorer than Africa. You can enforce a perfect tax regime or a perfect ID system (neither of which is actually possible) on such a chaotic society, but you have to have productivity to make use of increased taxes and a better ID system. Indians are mostly unskilled, uneducated, and untrained, in short, largely unfit for the modern economy.
Any rational ruler would have focused on creating competence among Indians, without which any hopes connected to increased taxation will fail. Moreover, the situation can easily become a major humanitarian crisis in the coming age of robots.
Many people will lose their ID cards soon — as perhaps more than 80% of Indians do not live in proper housing. They lack safe storage to preserve such cards. Moreover, only about 10% to 15% of the population are “benefiting” (by getting subsidized food, gas, etc.) from the cards. Could it be that most of these beneficiaries are members of the middle class?
Sensex index, daily. If you wonder why stock markets are not considered good yardsticks of economic performance, ponder the IBC General Index in Caracas for a moment, in local currency terms the best performing stock market in the world over the past 15 years. It is actually close to a record high, similar to the Sensex. Venezuela’s economy is doing so well, that hungry people are hunting for rats in the streets of Caracas. [PT] – click to enlarge.
India’s stock market has gone up nicely over the last quarter. The stock market is not necessarily a yardstick measuring the performance of the economy. In fact, it often goes up when long-term returns from economic activity are expected to fall. The Indian government has forced Indians to move their money from the informal sector to the formal, in order to help their corporate cronies and increase tax collection.
Alas, India’s growth is generated by its informal sector. Modi has seriously harmed this sector through the demonetization exercise. Eventually, the formal sector, which has been sitting comfortably while it was subsidized by the informal sector, will suffer as well. Twelve million people who join the workforce every year face a horrendous future in a country where failing to find a job is routine. Indian demographics are a massive liability. And crime is increasing.
I would not have written any more updates on the demonetization crisis, for a lot has already been said. But recently Modi’s party won elections in the province of Uttar Pradesh (UP). UP is the most populous province of India with 200 million inhabitants, and it has historically decided who comes to power in the federal government. It has per capita GDP of $730, fairly close to that of Afghanistan.
Professor Madhusudan Raj asserts that Modi’s BJP won primarily due to the anti-incumbency vote. If anti-incumbency stays in fashion, Modi might be in trouble in two years time when the next federal elections come. What might he do to avoid the inevitable? In caste- and class-ridden, backward and illiterate UP, demagogy is much more important than economic growth plans.
Would you buy a used car from this Yogi brother? Neither would we. [PT]
Modi has appointed Yogi Adityanath as the Chief Minister (CM) of UP. Adityanath has “given up worldly affairs” to be a “sanyasi”. What distinguishes Adityanath is his extreme hatred towards Muslims. He has exhorted Hindu men to convert 100 Muslim girls to Hinduism for each Hindu who converts to Islam.
He wants to make India a pure Hindu nation. Several years ago he started a religious association, Hindu Yuva Vahini, an organization mainly playing host to a criminally-minded unemployed rabble.
Yogi Adityanath asks for unity among Hindus and a religious war
Yogi Adityanath suggests killing 100 Muslims for each Hindu killed [a really nice guy – PT]
With the appointment of Yogi Adityanath as the CM of UP, talk about development is off the table. The issue is now how to make India a non-secular, Hindu nation.
India’s rapid descent continues. It is hard to dispute that India is well on its way to be the next Pakistan. Or perhaps India is already worse in some ways:
As difficult as it may be to believe – Pakistan’s adult citizens are actually wealthier than their Indian brethren – and the gap is widening [PT] – click to enlarge.
One of the largest illegal migrant groups in the US is from India. In this modern era, India’s crisis will not stay limited to India. As is the case with those from other eastern religions and societies, once they arrive, Indians vote to mirror what they left behind in their home country, often unknowingly — as the virus of totalitarianism is deeply ingrained in the culture of irrationality.
A wall might not be the answer, but Trump isn’t all that wrong.
Another Modimobile – #MIGA? [PT]
Submitted by Nick Giambruno via InternationalMan.com,
I recently sat down with my friend Jason Burack from Wall St for Main St.
Jason and I had an in-depth discussion on the decline of globalism, the War on Cash, and more.
I think you’ll enjoy our conversation.
* * *
Jason Burack: It seems that globalism may be on the retreat. What’s your opinion about that, in light of Brexit, Donald Trump winning, and the Italian referendum failing?
Nick Giambruno: I think you’re right, Jason. Right now globalism is on the decline. But let’s define “globalism” before I explain why. This word gets thrown around a lot. But most people don’t really know what it means.
It’s very simple. Globalism is the centralization of power into a couple of global institutions: the EU, the United Nations, the IMF, the World Bank, NAFTA, NATO, and so on. It’s really just a polite way of describing world government, or what George H.W. Bush termed the New World Order.
I think globalism and the centralization of power is always a bad thing. People who value individual freedom and economic freedom… really, freedom in general, should oppose it.
It’s an interesting moment in history. Those three things you just mentioned—Brexit, Trump, and the failure of the Italian referendum—are clear signs that globalism is losing steam.
Whether it’s a sort of one step back, two steps forward thing or the ideology of globalism is really on its way out remains to be seen.
Jason: Look at what’s going on with Brexit. The elites in London and Brussels are still fighting it. You had your boots on the ground in Italy. How angry were the people you talked to there about the referendum? Are they actually serious about leaving the EU?
Nick Giambruno: Well, here’s the thing. Most Italians didn’t know what the referendum was about. They just knew a “Yes” vote was a vote of confidence in Matteo Renzi’s pro-EU, pro-globalist government.
In short, the referendum was about taking power away from Italy’s regional and city governments and concentrating it more in the country’s central government. So it was worth opposing on that basis alone.
Most Italians didn’t understand the complex and arcane constitutional changes written into the referendum. So it took on a life of its own when Matteo Renzi promised to resign if it failed. That’s a vote everyone can understand.
When Renzi made that promise, he thought it was a safe bet. It’s similar to what happened to David Cameron with the Brexit vote.
But after I spent a few weeks in Italy—I’m also an Italian citizen—it was clear the referendum was no slam dunk. That’s why I predicted it would fail, and that Renzi would resign, months in advance.
Jason: So, what happens next, now that Renzi’s government has collapsed?
Nick Giambruno: There’s a rising populist party in Italy called the Five Star Movement. It’s actually led by a comedian. The party basically started out as a joke a few years ago.
Italians are so frustrated with so-called “mainstream” political parties that they’ve deserted them en masse for the Five Star Movement and other anti-establishment populist parties like the Lega Nord. The Five Star Movement is basically leading the polls as the most popular party in Italy.
All of Italy’s populist parties want a referendum on ditching the euro for Italy’s old currency, the lira. I think it would pass.
Italy hasn’t had any real economic growth since it joined the euro in 1999. That’s pretty profound. The Italian economy is in the same place it was 17 years ago. A lot of that is because the euro makes Italy uncompetitive with countries like Germany.
The next Italian government could be a coalition of anti-EU populist parties. If that happens, there’s an excellent chance Italy could leave the euro.
Keep in mind that Italy is a core member of the euro. If it leaves, France would probably leave, too. And if that happens, the euro is finished.
Jason: Without the euro, what’s left holding the EU together?
Nick Giambruno: Almost nothing. The euro is the main glue. Without it, the whole EU could unravel.
We’re still early in the process. But it doesn’t look good for the globalists and the Eurocrats. I think historians will look back at the failure of the December 4 Italian referendum as a crucial tipping point.
With globalism failing, I’m not sure what happens next. No one does.
We could see a rise of nationalism, which wouldn’t be a good thing. Or political power could diffuse even further, which would be a better outcome. Decentralization is good for individual and economic freedom.
So, instead of a rise of nationalism—which would strengthen the existing nation-states—European countries could split apart. Italy, for example, has only been a “country” since the mid-1800s. There are a number of serious secessionist movements in Italy and other European countries. I think there’s a very good chance some European nation-states will break apart—not just in our lifetimes, but in the intermediate future.
Jason: If Italy returns to the Italian lira, do you think it would prevent bailouts of the troubled Italian banks?
Nick Giambruno: The Italian banking system is a mile-high house of cards that’s getting wobblier by the day. As I mentioned, the Italian economy has stagnated for years. It hasn’t really grown since it joined the euro. This has translated into big problems for Italy’s banking system.
Italian banks have made hundreds of billions of dollars’ worth of loans to Italian individuals and businesses—loans that have soured along with the economy. They’re like an insatiable black hole that’s swallowing all the capital in Italy’s banking system.
Returning to the lira wouldn’t herald an era of sound economics. It just means the Italian government could recapitalize the banking system by turning on the printing press. It can’t do that with the euro.
On a somewhat related note, this example relates to the seemingly eternal inflation/deflation debate. I think it shows that ultimately, in a fiat money system where the government can create as many new currency units as it wants, deflation will always lose out to inflation.
Things are very different than they were in the 1930s. Back then, the last remnants of the gold standard meant most governments couldn’t print money to bail out failing banks. This limited their ability to create new currency units. Of course, that’s not the case today.
It’s completely predictable what any government with its back against the wall will do. They always choose the easy option, the option that preserves their own power… money printing on a massive scale.
That’s why inflation always wins out in the end.
Jason: That brings me to my next point. It seems like the elites are really pushing for a cashless society. Do you think Donald Trump is able to or would even want to stop this?
Nick Giambruno: I think the War on Cash is directly related to the world’s unsound banking systems. Thanks to the magic—or more accurately, institutionalized fraud—of fractional reserve banking, most banks only keep a small fraction of their depositors’ money on hand. It’s a very unstable, shaky situation.
One of the biggest mistakes the average person makes is thinking the money he puts in his bank account is his. It’s not.
Once you deposit money in the bank, it’s no longer your property. It belongs to the bank. What you own is a promise from the bank to repay you. Technically, you’re an unsecured creditor. That means you’re on the bottom of the totem pole if the bank goes bust. And you’re very likely to get burned if the bank gets in trouble.
Money in a bank is a very different beast than cash stuffed under your mattress. Yet 99.9% of people conflate the two.
Many people think the FDIC or some government safety net will rescue them if and when their bank fails. But the FDIC has only a couple of pennies for every dollar it supposedly insures. It wouldn’t take much to wipe out all of their reserves. So it’s really a false sense of security.
The average person is not even dimly aware of the enormous risks inherent in the banking system.
Jason: How does this all relate to the War on Cash?
Nick Giambruno: The War on Cash is a prop. It forces people out of cash and into banks. So it’s no surprise the war is ramping up as banking systems deteriorate.
Then you have what Nassim Taleb would call the “Intellectual Yet Idiot” from Harvard—people like Ken Rogoff and Larry Summers who’ve made a cashless society their mission. And it all starts with eliminating the $100 bill.
These people get prominent space in the mainstream financial media. They create an echo chamber of calls for a cashless society. It’s creepy and totalitarian. I mean, what kind of a person wakes up in the morning wanting to do things that would extinguish many of our remaining liberties?
Privacy is a fundamental human right. It"s necessary to protect human dignity, which is essential to a free society. But unfortunately, a lot of people have forgotten that.
Also, in a cashless society, the government can concoct an unlimited number of new ways to confiscate your wealth.
The War on Cash is a mortal threat to individual and economic liberty. I think its advocates are clearly sociopaths and enemies of the common man. Unfortunately, I don’t see the war slowing down. I see it heating up.
Just look at what happened in India recently. On the day of the US election—when the whole world was distracted—the Indian government ambushed its citizens. Instantly, and without warning, it declared certain high-value currency notes invalid.
They said, “Oh, well, tax evaders, drug dealers, and terrorists use cash so we have to get rid of it or make it harder to use.”
It’s completely ridiculous. Anybody who can think critically and independently can see right through this. It’s simply a clumsily executed power grab. It’s done nothing but create chaos and harm the Indian economy.
Yet, when I read about it in the mainstream financial media, I often come across articles praising the Indian government for its bold reforms. It’s quite strange, like we’re living in a bizarro world.
Instead of resisting, the Indian people sheepishly accepted their government’s blatant power grab. This will likely embolden other governments… and the Intellectual Yet Idiot class, of course.
It means we should expect the War on Cash to accelerate in 2017. I haven’t seen any evidence suggesting Trump would reverse any of this.
