India’s War on Cash Is a Total Bust.

India’s War on Cash Is a Total Bust, by Mihir Sharma.

When India’s prime minister [Narendra Modi] announced last November that 86 percent of India’s currency would be worthless in hours, he presented the decree as a well-thought-out measure to attack cash “hoarded by anti-national and anti-social elements.”

We were led to believe that honest taxpayers would line up to return their high-value currency notes, but these “anti-national and anti-social elements” would be unable to do so without raising suspicion….

Well, if that’s true, then apparently nobody in India is dishonest — because, according to the Reserve Bank of India’s long-delayed accounting, more than 99 percent of the cash in circulation has been returned. This isn’t surprising. Indians are not the idiots their government seemed to imagine. Within days of the “demonetization,” a dozen methods to launder piles of cash had been pioneered. Instead of the world’s best-planned attack on black money, India’s government had launched the world’s biggest legal money laundering scheme.

Eight months on, no argument advanced by the government or its backers in favor of demonetization has been validated. …

Some said that counterfeit currency would be exposed; in fact, it’s less than 0.0007 percent of the cash taken in. The prime minister himself argued that demonetization would “break the back of terrorism” by cutting off sources of funding. Instead, this has been among the bloodiest summers for Indian security forces in Kashmir. …

The only real, if weak, defense left is that demonetization pushed the Indian economy toward more formal ways of operating and saving and expanded the tax base. But neither of these requires a policy as incredibly destructive as demonetization. …

Exactly how disruptive was demonetization? Well, it may have eliminated over 5 million jobs; it’s certainly ensured that growth slowed. For weeks, hundreds of thousands of small businesses struggled to find working capital; many of them may have gone out of business permanently. There was so little cash that agricultural prices crashed — and, as a result, protesting farmers began to demand that their debts be written off. The government may give in, with dreadful consequences for India’s fiscal position.

Most of this could have been foreseen by any half-decent economist. But the demonetization decision was taken in secret by less than half a dozen people, none of them an economist. Few governments in history have introduced something as disruptive as this with as little thought, preparation or study. …

India’s government has learned no lessons from this fiasco. Why should it? It hasn’t suffered at the ballot box. Enough voters bought the idea that demonetization may not have worked “perfectly,” but at least Modi tried.

The global elite and those in favor of big- government want to get rid of cash, so all money is held on computers under their surveillance. Would you disagree with them if they could take or freeze all your money effortlessly and instantly?