The Indian government of prime minister Narendra Modi is currently engaged in imposing a half-truth upon the country and betraying those who voted for him. He is stealing and destroying the savings of the working people for the benefit of the banks and government, under the false claim of “clamping down on tax fraud”.
The government has claimed that people are “avoiding taxes”, so what is Modi’s solution? To immediately declare all 1000 and 500 rupee notes as “invalid” and no longer currency. The now defunct bills can no longer be used in stores nor to make payments, and can only be exchanged at banks for smaller denominations. Panic has set in and massive lines have appeared at banks. Most people do not have the time to stand in line for days and change their money, but risk losing all of their savings if they don’t.
This borders on a deliberate act of violence against the working class and the poor. It will, of course, have absolutely no effect on the wealthiest tax dodgers whose money is already in the bank. It will only affect those living day-to-day on cash.
This wouldn’t be a problem if this were a gradual currency change, such as in the Philippines which gave citizens more than two years’ notice. But the Indian government gave the country’s citizens four hours’ notice, a move of such incompetence that one would expect it from the Zimbabwean government.
On 8 November, Prime Minister Narendra Modi gave only four hours’ notice that virtually all the cash in the world’s seventh-largest economy would be effectively worthless.
The Indian government likes to use the technical term “demonetisation” to describe the move, which makes it sound rather dull. It isn’t. This is the economic equivalent of “shock and awe”.
Mr Modi’s “shock and awe” declaration meant that 1,000 and 500 rupee notes would no longer be valid.
These may be the largest denomination Indian notes but they are not high value by international standards – 1,000 rupees is only £12. But together the two notes represent 86% of the currency in circulation.
In response, many Indian people have resorted to and started a barter economy. Vendors (who do have time to go to banks and exchange larger bills) are accepting them and giving out cash, or even loaning money in some cases. This sort of private economy (which the government is trying to stifle) is saving people’s life savings.
A tweet by a journalist that she had managed to buy vegetables after topping up her local vendor’s phone went viral over the weekend, with many extolling the virtues of good old-fashioned bartering.
India is a largely cash driven economy and many cities still rely on notes for essential transactions such as transport, buying fruit and vegetables from neighbourhood vendors and employing the services of plumbers, carpenters and electricians.
Many people are functioning on what some pundits are calling an “economy of trust” – that is they are providing goods and services and telling people to pay them later.
This is reminiscent of 1988 when the US tried to destroy Panama’s economy, an attempt to destablize Manuel Noriega’s hold on power. People resorted to bartering and honouring cheques as a short term means of economic flow when there was little or no physical cash to be had. (Panama has its own official currency, but the US dollar is the day-to-day cash used in the country.)
PANAMA CITY, Panama — International banks fearing a run on deposits closed their doors Friday and anxious customers lined up outside, demanding their money. The National Bank accused the United States of crippling Panama’s banking.
“No one, not even in his blackest nightmare, could have imagined we’d be in such a state: The banks closed, no money. People are getting desperate,” said national assemblyman Mario de Obaldia. “We can’t go on like this.”
A general strike ended Friday, with opposition leaders saying the financial crisis would continue the pressure on the regime of Gen. Manuel Antonio Noriega.
The National Bank of Panama issued a communique advising local banks that it could not meet their requests for money because U.S. authorities had prevented the shipment of $10 million from the Republic National Bank in New York.