India Eliminates 80% of its Cash- Gold Next?

It Has Begun- India First Casualty in War on Cash
-cover pic, an ATM line in India yesterday.


The tension between centrality, on the one hand, and competition, on the other, is probably the oldest of all market structure issues.- Arthur Levitt

"Show me the structure of a Market and I will tell you  who benefits from that structure. Show me that and I will show you how that market is gamed"-VBL

  • ATMs were shut down
  • old bills immediately lost their status as legal tender
  • indians pile into Gold driving up the premium to spot
  • India gold import ban rumoured next


As stated several times here, the War on Cash has come and gone. Cash lost. Now we are seeing "trial balloons" floated in countries that the U.S. and West are keeping a close eye on. Mistakes in execution will be corrected when it happens here. And it will happen here. Before getting into what happened in India, we think it more important to note what has already happened here.This event in India reveals how easily money can become inaccessible and that there are always risks in where you choose to keep your savings.

BitCoin is Not your Friend- VLanci and Soren K.


The "Swapping Freedom for Convenience" Pretext

In the west it will be a trade off of convenience for financial freedom at first. Sometimes it will be pitched as the next logical step to eliminate cumbersome cash since we do most of our banking electronically already.  Marvin Goodfriend is an anti cash salesman who explains how much better the US would be if we exchanged a fiat currency for a virtual fiat currency.

The "Stop Crime" Pretext

Simultaneously it will be sold to government as a way to close criminal operations and black markets. Remember the war on Iraq that neocons were itching for was justified after Saudi bombers hit the USA. Ken Rogoff is one such Cash Neo-Con.

"Paper money fuels corruption, terrorism, tax evasion and illegal immigration—so the U.S. should get rid of the $100 bill and other large notes" Ken Rogoff


On Free Markets and Free Men

If all attempts ot gently coerce the public out of its freedom fails, the government will wait for a crisis as an opportunity to enact its agenda. In 2008, ATMs were shut here. Banks considered taking a "holiday". In India they did so without apology or pretense.

We find this especially repulsive and in opposition to what America stands for. Feel free to watch "It's a Wonderful Life" if you must. No banks stays open during a run these days.  As former floor-traders who were at the WTC on 9/11, several of us lost people who stood less than 3 feet from us for 10 years. Yet we were united in our own beliefs that nothing can upend free markets. Without transportation or normal access to the area, the trading floors on NYMEX and COMEX opened in the days immediately after the attacks. And the overwhelming majority of traders showed up. The reasons were simple. Free markets for free men. That is what patriots do. Corporations are patriotic when convenient. Citizens are patriotic when inconvenient. And it is certainly not freedom our government is protecting now. Government is a leech. And corporations are parasites  feeding off of and directing what the leeches should do next.

"Banks and governments around the world are cracking down on the use of paper money, and in turn, eliminating any anonymity left in the current system. Through strict rules on cash transactions and civil asset forfeiture laws, for example, the system has already instituted penalties for using cash. But as payments evolve into a purely digital network, the consequences of this new paradigm are being brought into the spotlight."  Full article HERE

How Market Structure will Remove Your Economic Freedom

  1. Cash is Dead
    • ATM fees, Physical cash trading at a discount to electronic cash, etc
  2. Coopt Gold further
    • ETFs did half the job, CUSIPS, Taxes, international restrictions, and digitizing
  3. Brand Gold to eliminate competition with Gov't Gold- China is doing this
  4. Bitcoin will be a force of centralized planning, not a means of freedom
    • Blockchain and bitcoin are perfectly suited to transfer risk from banks to clients.
    • the CME may as well buy Bitcoin. And Exchanges are the new TBTF Government subsidies.

Cash worth Less than e-Cash? YES WE CAN

Here's one Jim Rickards  alerted us to in a twitter comment he made:

 Imagine different $ values for cash & bank deposits not "defended" by Fed. (The) Fed considers it (already)

We  think he is referring to this section from the article which implies that paper money can be made to trade at less than its digital counterpart.

So unless we are misreading this, if used, the Fed would be debasing your faith in a  FIAT paper currency even while it tries to establish an even more esoteric form of FIAT, digital money.   But what would give credibility to a  digital currency that is based only on (unseen) electrons? Janet Yellen's opinion and the occasional fat finger?

Those of us familiar with swaps know that the real thing almost always trades at a premium to the tracking product. Here the tracking product would become the physical, and the physical an unsupported tracking stock. This is about tails wagging dogs.

Let's be clear. Gold is the ultimate FIAT money.  It has value because we believe it has value. But it is suited to have value because it is unused in industry and as a monetary unit its supply growth is very predictable. What could change that? Two polar opposite examples would be: If Gold were alchemically synthesized (loses value) or if it were used industrially and  irrecoverably  (gains value). These would undermine Gold's credibility as a stable currency. Our issue here is demoting a tangible object (currency) that represents an intangible store of value (FIAT), to an intangible currency (101101101010's) representing the same.


MindSuckers and Leeches

There is precedent for bottom feeders controlled by parasites in nature. One we find  appropriate is the Jewel Wasp. The jewel wasp (Ampulex compressa) hunts cockroaches and takes over their decision-making processes.

Corporations, Former Corporate Heads Now in Politics, and  Lobbyists

Meet the Corporate Jewel Wasp. Wears a fancy suit, looks lithe and cool. Almost sexy in comparison to its prey, the roach. The government roach lives on hand outs by his representatives in the form of votes. The wasp comes along and literally mind controls the roach to do as it wants. There are many examples in nature. but the symbiosis of the politician and the corporation is the worst. For in their situation, the roach lives, and its constituency dies of infection.


Cash, Gold, Or Bitcoin. It Can All be Co-opted or Confiscated

The war itself is not on cash, nor will it be on Gold per se when that attack actually comes. The real conflict here is between central planners who want to do what they think is best for the unwashed masses, and economic freedom.

  1. Confiscation of Gold- in China and countries where no consent is needed
  2. U.S. Confiscation of Gold Wealth- taxes, IRS home storage rules, Cash settled futures
  3. Absorption into the Banking system- Gold must be CUSIP labeled to be used

The Central planners want to herd everyone into a protective cocoon. They truly believe they are helping mankind. The carpetbaggers are the institutions that tell the planners what they want to hear. They are the corporations and individuals who seek to profit from a society more and more unbalanced in its class system. These are regulatory arbitrageurs who run businesses that will ensure they are on the other side of the wall being built between  the public and the elites. These corporations are there to write the laws for the inept politicians, lobby them with false pretense, and finally reap the rewards of their gamed global market structure.

After the cash, they will come for the Gold. But not before accumulating all they can thru free market "management". And even after that, they will seek to include Gold in the system via windfall taxes, CUSIP labeling, and confiscation where permitted. With Cash, they can state that certain bills are worthless and it will be so. But with Gold they cannot remove its intrinsic value. Therefore other means will be used to "brand it". WE predict down the road, brown markets and black market economy will actually grow. We may see one day a call by governments to submit all non jewellry Gold to be submited, tagged and valued electronically. Those who's gold is not in the system will not be accepted after a certain date. And that will be the beginning of a huge market for gold priced under spot being sold by desperate people to people who have a means to "legitimize it". Fantasy? mabe. Delusional? Possibly. but as traders it is our habit to work from the worst case scenario backwards. We have see ntheextreme case in our minds adn laid it out for you several times. And now we are watcvhing ads the world's economic freedom is slowly devoured by a boa constrictor after beingsufficated. And we are still waiting for the push back. There is none yet.  You should be paying very close attention to what is going on in the world.


Previous stories outlining what is now happening:


The Indian Government Just Eliminated 80% of the Country's Cash

Shaun Bradley and The Indian government took unprecedented action last week when it eliminated 500 and 1,000 rupee paper notes from its financial system. The change occurred essentially overnight.

Indian Prime Minister Narendra Modi initiated the policy on Nov. 8th and has actively defended his position since. The announcement was made under the guise of cracking down on corruption and black money, but the surprise caused bank closures across the country.

The old bills immediately lost their status as legal tender, and authorities ordered citizens to exchange them for new ones within 50 days. The 500 rupee is only worth around $7.36, making the Indian government’s move the equivalent of the U.S. government banning ten and twenty dollar bills. Even so, 500 and 1,000 rupee notes were previously the largest denominations in the country.

ATMs were shut down temporarily, which allowed the fear of uncertainty to make its way into the public psyche. But even as the secrecy of the plan has inspired a wave of distrust in the population, things have remained relatively calm thus far. In spite of this calm, India’s case is likely only the beginning of further financial repression in an encroaching war on cash.

Prime Minister Modi insisted he felt sympathy for the struggle of the average citizen but argued  the move will ultimately benefit the poor.

“I am aware you are facing difficulties with 500 and 1,000-rupee notes ban. I understand the inconvenience…I am really pained by the inconvenience and that is why I am working tirelessly to help people overcome this situation. I will never let anyone loot money that belongs to India’s poor.”

Financial institutions have struggled to keep the situation under control while they attempt to meet the government mandate. The unexpected change has driven millions to banks to exchange their cash holdings as Indians form huge lines to obtain what little cash is available; the logistics of exchanging the larger bills for smaller denominations has drained cash inventories, and the Reserve Bank of India is printing new money at full capacity to make up for the shortage.

The banned currency accounts for nearly 80% of the total outstanding notes in circulation throughout the Indian economy, and in an effort to calm mounting frustrations, withdrawal limits were raised from 20,000 to 24,000 rupees per week.

Guru Birajdar, a lawyer, spoke about the hardships people are facing in everyday life.

“I can’t even buy a cup of tea…I didn’t go to work today because I had no cash. All my money is in 500s and 1,000s so I had to come straight to the bank this morning. I had two 100-rupee notes in my wallet on Tuesday night, but I used that up yesterday,” he said, as reported by the Guardian.

Though the sudden and sweeping action was sold as a response to crimes like tax evasion, it was more than likely a reaction to the series of problems Indian banks are facing. The amount of paper money customers have been pulling from their accounts has jumped 15% since last year, making it increasingly more difficult for the central bank and government to maintain control over the financial markets.

By removing so much of the currency supply at once with the ban on 500 and 1,000 rupee notes, the government is holding the life savings of the nation hostage. If citizens want to take out their savings, per the new policy, the paper bills no longer exist to do so. This forced compliance with this new decree should be viewed as nothing less than extortion.

Withdrawing money is one of the few forms of protest individuals can exert against financial repression, and the immense lines at the banks show Indians are bracing for inconvenience and hardship in the future.

This event is the canary in the coal mine for those concerned with the crimes committed through government and central bank collusion. Norms in the financial world are shifting rapidly, and as technology’s role in the monetary system increases, those who want to carry out transactions with something as archaic as cash will be inevitably seen as suspicious.

The challenges that have been thrust upon Indian citizens may be new, but they highlight a dangerous trend that governments may utilize to eliminate anonymous transactions. By removing the only way people can physically take money out of their accounts by limiting customers to withdrawals of small bills, these financial institutions have essentially seized the public’s assets. The long-term consequences of this level of control likely won’t be felt until another crisis in confidence, like the one in 2008, hits the global markets.

This event in India reveals how easily money can become inaccessible and that there are always risks in where you choose to keep your savings.

Read more by Soren K.Group