Here’s the latest on what’s going on with Modi’s Money Massacre.
My assistant wanted to withdraw 24000 rupees from his bank account for reasons of his own. In order to do that he would have had to go daily for twelve days to the ATM, because (last I looked) Modi's government has put a limit of 2000 rupees of your own money that you can withdraw in a day. That's assuming the ATM is working and hasn't run out of cash (fat chance). So what I did was accumulate my cash earnings until I had 24000 rupees (this took me a very long time because I am earning a tiny fraction of what I should be earning at this time of year, since nobody has money), and gave it to him, in return for which he gave me a cheque.
This is a pretty good example of what's going to happen in response to Modi's Money Massacre: people are actually going to trust banks less and less, and keep their money elsewhere - including unofficial "banks" such as people who own safes and can keep your money until you want it, in return for a relatively nominal fee. In other words, what it will do is drive more people away from banking, not the reverse. That's even without the banks literally changing their own regulations hour to hour as the whole mess gets more and more unmanageable.
For instance, a couple of days ago the Reserve Bank of India suddenly declared - in the middle of working hours, no less - that from that moment on, anyone who still wanted to deposit old 500 and 1000 rupee notes would be able to do it only once, and up to a maximum of Rs 5000. And in order to do that they'd have to submit, in the presence of two bank officials, a satisfactory written explanation. This was in direct contradiction to the Finance Minister's advice to people to wait until bank queues shortened near the end of the year before rushing to deposit their old notes, since they had until 30th December to do so.
In response to this bank order, literally between two customers, the banks started implementing this - obviously making nobody happy. And by the very next day the Reserve Bank withdrew its own order. Again.
As a matter of fact, it doesn’t make the slightest bit of difference what the government says, because the banks are pretty much making up their own rules now. Each bank is imposing its own limits on how much cash anyone can withdraw, and changing it from day to day, depending on how much money it says it has on hand. That isn’t necessarily how much it actually has, of course, just how much it admits to having. And the money it does, reluctantly, hand out is more often than not only in the form of the utterly useless toffee-paper 2000 rupee notes...which are useless because there’s no way to get change for them.
I read that even Modi’s party is getting increasingly worried about the “fallout” of this, which pretty much guarantees that the entire reason for creating this mess was to win state elections due for next year; first, by crippling the other parties financially, and, secondly, by temporarily boosting Modi’s popularity as a “crusader against corruption”. Only, the implementation has been so incredibly incompetent, even by Hindunazi standards, that after putting all of us through all of this, Modi might not even be able to achieve that.
So what is this demonetisation, anyway? It’s nothing more than a scam.
Here’s how the scam works:
What is money? In modern terms, it's an IOU note issued by a state to its citizenry. If you cash in the note by depositing it in a bank the state, in effect, gives you the value of the money for as long as you keep it in the bank. When you withdraw it you get an IOU again with each currency note.
Now suppose you're someone who's borrowed from ten people. You have enough to repay eight of them, but not all, and your revenue isn't enough to increase that number. Besides, you want to buy yourself a new house.
At this point, suppose you tell your creditors - who are scattered all over the country
- that effective tomorrow midnight, you'll no longer recognise said IOU notes,
then. Out of ten, say only seven manage it on time, as you'd expected. You pay
and if they want their money back they'll have to get to your house before them off and with the eighth, whose money you could have paid back, but didn't since he didn't come on time, you buy your house.
If you're an ordinary citizen you can't get away with this, but since you control a
government, its media, its armed forces and all the coercive apparatus at its
still years away. And the money, that is, IOUs which weren't handed in on time
disposal, you can. If the people rebel, they'll be put down. Elections are can be "loaned" to crony capitalists and party functionaries and be made to disappear.
Under these circumstances, the worst thing that could happen is if those ten
creditors all managed to turn up on time, because then you'd go bankrupt. And
so you must make it as hard as possible for them to turn up on time. Making
things difficult for IOU holders isn't a glitch; it is the whole point of the exercise.
(This has been your report from Demonetisationistan. Stay tuned for further bulletins.)