Another Currency Call-In

Gold, Jewelry Sales Surge in India on Central Bank’s Currency Crack-down!

The Reserve Bank of India continues its war on cash and its attempts to herd the nation’s people into the banking system.  

In a sudden move, the central bank announced that it was withdrawing 2,000-rupee notes from circulation.  The notes are equal to about $12.

The call-in is reminiscent of India’s crack-down on cash in 2016 when it withdrew 500- and 1,000-rupee notes from circulation.  That move caused inconveniences, dislocations, and upheavals across the country.  

Because it is inevitable that the US will in time experience its own currency call-in, here is a brief digest of India’s experience in 2016 when the government demonetized its widely used 500- and 1,000-rupee notes. 

Predictably the government disguised the currency call-in as a way to catch drug dealers and counterfeiters.  It did no such thing.  It was a combination of a tax grab and a means of stampeding the populous into the crony banking system.  The old bills were exchangeable for a period of weeks, after which they became worthless.  People who turned in currency were expected to be able to explain the source of their money and had their fingers marked with indelible ink so they couldn’t make subsequent exchanges.  

At the same time, the government banned all cash transactions of 300,000 rupees or more, an amount less than $5,000.   The sudden currency call-in cost millions of jobs, lost in the cash economy.  A billion people who lived in places without reliable electricity and internet access were nevertheless forced into digital banking.  It was no surprise to find angry mobs had taken to the streets.  

Now the Indian government is at it again.  Details of the current currency call-in are somewhat different than the last one.  The Hindustan Times reports that “people scrambled to buy gold and silver in bulk in bullion markets, leading to an increase in prices.”  At the same time, the government is cracking down on hawala transactions, informal non-bank, and non-reported fund transfers.

India’s government insists that this new currency call-in does not mean demonetization of the currency.

Meanwhile, the war on currency and privacy continues here in the US.  And hint:  neither privacy nor honest currency is likely to end up on top.  Make sure you have ample gold and silver in your portfolio as the crackdown continues.