This isn’t the most powerful complaint ever

India changes high value bank notes to get at the tax evaders and the black money. This is going to cause a political problem:

The prime minister last week outlawed 500- and 1,000-rupee notes in a drive to rein in corruption and a shadow economy that accounts for a fifth of India’s $2.1tn gross domestic product.

With no state election funding, illicit cash is the lifeblood for political parties that collect money from candidates and businessmen, and then spend it on staging rallies, hiring helicopters and on “gifts” to win votes.

Spending on the Uttar Pradesh election is forecast to hit a record 40bn rupees ($590m), despite the cancellation of big denominations.

Modi’s banknote change has so far proven popular among increasingly aspirational voters who are tired of corruption, although views among the broader population and economists are divided over the efficacy and fairness of the move.

Opposition politicians have united to decry it.

“We will have to plan the entire election strategy all over again,” said Pradeep Mathur, a senior Uttar Pradesh leader of the Congress opposition party that was trounced by the BJP in national elections in 2014.

No, not that powerful a complaint really.

15 comments on “This isn’t the most powerful complaint ever

  1. A corrupt shithole uses its own gangs corruption as a launching platform for cash free tyranny.

    Again were I PM (of the UK) I would create a program to print—in controlled numbers, to replace what notes the Indian scummers are removing/destroying—500/1000 rupee notes to prevent this step to electronic tyranny from getting anywhere.

    Though by all accounts chaos is what it is producing. Good–that will discourage the rest of the worldwide political scum.

  2. I wonder if there is enough heft in the British economy to supply them with a trusted alternative? Much of the Balkans used to be on the Deutsch mark and then the Euro. But that was the Germans.

    There are enough Indians travelling back and forth.

  3. I wonder if there is enough heft in the British economy to supply them with a trusted alternative?

    It’s no more effective than the change in rupee notes. The main problem isn’t counterfeiting, it is the money moving around the informal and illegal economies.

    Which are harder to police because so bank accounts are so rare in the rural areas (i.e. most of the place), therefore the almost-practical-in-the-UK wet dreams of the Murphies of this world of a cash-free (and therefore state-seizable) economy just don’t map on the reality of India in 2016.

  4. I was listening to Greg Mankiw and he was saying that one of the reasons central bankers like the idea of a cashless society is that there is no lower bound for interest rates. With cash he said the lower bound is slightly negative, as we have now, but if it goes much lower it makes it cost effective to build your own safes and strong rooms.

    He did think much lower rates could be applied as it would be seen as slow theft, he’s not wrong there.

  5. I’m not sure I see the benefit to lower interest rates – it all seems a little bit bread and circus to me.

    So you lower interest rates, it’s easier to get credit so lots of people get more credit (increasing spending and potentially increasing GDP). At the same time saving becomes less useful so people start spending from their savings as well. This pushes up asset prices (the big example being houses).

    But then what do you do? You can’t raise the interest rates, as all of these people have lots of credit so they’ll be left in untenable positions. From a political point of view, this means that any interest rate rise will cost you voters. If you could keep dropping it on the other hand, everything is rosy.

    Except that it all seems like a bit of a bubble. We’re making it so that the people who had lots of assets to start with are sitting pretty and those with none are forever playing catch-up, and they can’t even sit back and save for a while as they’ll be effectively losing money by doing so.

    As someone who’s getting on for 40, earning significantly more than the average wage and can’t even think about buying a house, it’s not a good picture.

    (p.s. it would be lovely if there were some way to get notified of new comments on a post – is there any such thing available or would Tim have to do something server side?)

  6. With no state election funding, illicit cash is the lifeblood for political parties that collect money from candidates

    ‘With no state election funding’ – my country has no state election funding, many do not, and all these politicians seem to be able to find alternate sources of funding just fine.

    Both Presidential candidates managed to find plenty of funding on their own and, in fact, the winner of that competition managed to do so while *significantly underspending* his losing opponent.

  7. Mr Ecks
    November 17, 2016 at 9:40 am

    Again were I PM (of the UK) I would create a program to print—in controlled numbers, to replace what notes the Indian scummers are removing/destroying—500/1000 rupee notes to prevent this step to electronic tyranny from getting anywhere.

    If your (and my) governments weren’t watching India closely to see how best to eliminate cash in our own countries they’d have been pushing alternate currencies and (in my own country) not arresting people who start their own money-making (like, literally making their own money – not counterfeiting) business.

  8. Exactly so Agammamon.

    It is yet another area for us to fight back.

    Voting me PM would be a good start. And lucrative too if my “Invade Sweden” plan works out.

  9. I’m in rural Rajasthan at the moment and it is bloody unpopular. For the 47% without a bank account it has been devastating. Small traders have seen their business crash by over 80%. Farmers can’t buy seed at the winter planting time and everyone has to queue for the whole day to change the 2,500 maximum allowable. That’s about £28. Meanwhile 40% of the ATMs can’t function with the new notes. There is real anger and the government has shown itself to be completely out of touch with the poor rural majority, who they have just shafted mightily.

  10. Rational Anarchist,

    ‘it would be lovely if there were some way to get notified of new comments on a post’

    It depends on how you consume the content but you can use the RSS feed, it is that little square icon next to the words ‘Follow Us’ at the top.

  11. “I’m in rural Rajasthan at the moment and it is bloody unpopular. ”

    It isn’t popular amongst the TMS team either.

    Aggers was moaning about queuing to change a piffling amount, then admitted breaking the law by going round to another bank and getting a second bite.

    Boycs called him a fool, in his inimitable style, saying he’d sent someone else to do it for him.

  12. Boycs called him a fool, in his inimitable style, saying he’d sent someone else to do it for him.

    I’d be amazed if the black money hoarders haven’t decided to take a (say) 5% hit by offering a commission to their labourers for standing in line with small amounts each, than risk either losing it all or having it all taxed.

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