The great step toward the cashless and completely controlled economy is underway. It's a trial run for the process of demonetization itself. It causes counter-economic activity to come under bank scrutiny.
© Wikimedia Commons
What the government giveth, the government taketh away. Like that money in your wallet.
Do you really think it's yours? If so, the people of India would like to have a word with you.Oh, haven't you heard? In case you missed the story during the din and clatter of the US sElection circus, all hell has broken loose in India.
It all started on November 8th, when Indian Prime Minister Narendra Modi made a
surprise television address to the nation. As you might have guessed, this was no stale policy speech. Instead, Modi sent shockwaves through the country (and the region) by announcing that as of midnight that evening, existing 500 and 1000 rupee notes would no longer be accepted as legal tender. The tax cattle would have until December 30th to trade in their 500 and 1000 rupee notes at post offices and banks.
And just like that the bits of colored paper in everyone's wallets were revealed as...well, useless bits of colored paper.
Although this type of revelation would cause panic and chaos even in the most orderly of transitions, the way the Indian government has handled this event has made it that much worse. The
list of rules, regulations, stipulations, stop-gap measures, withdrawal and exchange limits, deadlines and red tape involved in switching over to the newly-minted replacement 500 and 2000 rupee notes was enough to leave people in as much confusion as panic. At one point they even started
marking people's index finger in indelible ink to prevent repeat money exchangers from clogging the lines at busy banks.
To put the scale of this move in perspective, note that the old 500 and 1000 rupee notes make up
86% of the cash in the Indian economy.
And all that cash has just been stripped of its legal tender status with the flick of a bureaucratic switch.So you can imagine (or, this being the age of the internet, you can actually watch) the scenes of
violence,
chaos, and
public nudity(?) as tensions flare and people wait in
unbelievable line ups to exchange their cash. And you can also imagine how the government is
scrambling to make ad hoc adjustments to their ad hoc rules for dealing with the mess they created.
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