The Indian Prime Minister announced on 8th November 2016 that Rs 500 and Rs 1,000 banknotes would no longer be legal tender. Linked are Part-I, Part-II and Part-III updates on the rapidly encroaching police state.
The economic and social mess that Modi has created is unprecedented. It will go down in history as an epitome of naivety and arrogance due to Modi’s self-centered desire to increase tax-collection at any cost.
Indian jewelry merchant Photo via indiatimes.com
Fear has gripped the bullion market, for one is deemed to be guilty until proven otherwise. People with perfectly legal cash are afraid of cameras recording their purchases and having to pay outrageous bribes. After an adjustment period people will buy more — not less — gold. For now, the gold market has gone mostly underground with the gold price hovering around US$1,700 per ounce. Did Modi want to boost the informal economy?
The Cultural and Political Undercurrent
The individual has been reduced to a cog in a big machine that exists in Modi’s imagination. The country is expected to rally behind him, for his glory. The IMF is going along with Modi, for in their simplistic view, enforcing western-style institutions on India will lead to the replication of western economic development and the rule of law in India.
Not that increasingly totalitarian and centralized governing institutions work even in the West, but in the alien culture— irrational and tribal — of India, they rapidly mutate and become very corrupt. That is, unless such institutions are run by Europeans. But the days when Britain ruled India are over.
In the irrational and extremely tribal society of India, where calculation and planning are much more difficult, institutions must be much more decentralized than in the West if they are to function properly. At the moment Modi is doing the exact opposite: rapidly increasing his centralized control.
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