Posted on 11/16/2016 11:18:58 AM PST by Former Proud Canadian
Chaos in the Wake of the Ban
Here is a link to Part 1, about what happened in the first two days after India’s government made Rs 500 (~$7.50) and Rs 1,000 (~$15) banknotes illegal. They can now only be converted to Rs 100 (~$1.50) or lower denomination notes, at bank branches or post offices. Banks were closed the first day after the decision. What follows is the crux of what has happened over the subsequent four days.
(Excerpt) Read more at zerohedge.com ...
Chaos has resulted. Who knew?
Currency manipulation should be a capital offense and restricting the use of a currency is a form of manipulation. So is counterfeiting. Yes, I’m talking about you Mister Federal Reserve.
There are those suggesting the same thing to happen in the US, almost as if this was being coordinated.
This policy is now causing deaths. In India, it’s common when someone has to go in to the hospital for the family to bring a stack of cash. Treatments are paid for at the time of administration, as are medications or supplies needed. Anyone who was in the middle of hospitalization when the demonetization happened had 3 days to spend the cash they brought; after that, they’d have to try to get it converted.
So now families are unable to get money converted in time, and necessary medicines cannot be purchased. There’s an article out there today talking about kids and elderly who have now died because their families can’t come up with the cash for procedures in time.
There’s a huge amount of unrest brewing in India now, just under the surface. They’re just about to the point of this triggering a recall election to yank Modi.
What’s worse is, apparently a bunch of “VIPs” in the political elite circles were given a heads-up on the cutoff before the public was, so they had plenty of time to prepare, and to get money moved or deposited without having to account for it or be subject to limits.
Imagine having to pay for everything in one dollar bills.
When idiots screw around with money, citizens go to the wall.
This is a nutball development for India.
“What’s worse is, apparently a bunch of “VIPs” in the political elite circles were given a heads-up on the cutoff before the public was, so they had plenty of time to prepare, and to get money moved or deposited without having to account for it or be subject to limits.”
This is how revolutions start. If one of my family died because the government denied me access to cash I would take it very personally.
This is the beauty of gold as a store of value - the government can say that such-and-such denomination of their fiat current is no longer valid, or has to be traded in at a 10-1 ratio, etc., but they cannot claim that the one ounce gold coin you have now weighs only 1/2 ounce. That is why all politicians fear gold.
“There are those suggesting the same thing to happen in the US, almost as if this was being coordinated.”
India will, btw, have a revolution in short order - and it won’t be non-violent. The Indian economy runs on cash, and businesses don’t have enough cash to pay their workers. Thus, the workers don’t have enough money to buy food and/or medicine. Not exactly a recipe for peaceful normalcy.
“This is the beauty of gold as a store of value - the government can say that such-and-such denomination of their fiat current is no longer valid, or has to be traded in at a 10-1 ratio, etc., but they cannot claim that the one ounce gold coin you have now weighs only 1/2 ounce. That is why all politicians fear gold.”
That’s why you buy for cash, over time. That’s also why you buy in a variety of denominations - you really, REALLY don’t want to pay for a bag of rice or a couple loaves of bread with a 1 ounce gold coin, do you? This is also a powerful argument for having significant amounts of silver, also in a variety of denominations.
Check my tagline.
Meanwhile....
Deposits reflecting ‘ábnormal’ rise in income may face 200 per cent penalty, say tax authorities
I would like to point out that there is only enough paper currency and coin to support 4% of US daily retail trade.
This means that if *anything* disrupts our virtual currency system, the United States will be even worse off than India.
Right now, the list of things that could do this is growing. Not just tangible causes, but any panic that resulted in a “cash run” at banks, or bank holidays.
Oddly enough, one of the things that *wouldn’t* directly cause a crisis is a stock market crash.
Importantly, major corporations are so aware of this risk that they have been stockpiling physical US currency out of the United States.
“Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Cisco Systems (CSCO) and Oracle (ORCL) are sitting on $504 billion, or 30%, of the $1.7 trillion in cash and cash equivalents held by U.S. non-financial companies in 2015.”
72% of total cash held by all non-financial U.S. companies is stockpiled outside the U.S.
What do they know that we don’t?
Indeed. The one ounce was figurative - i.e. they can't change the weight of whatever you have.
You are exactly right about the virtual currency system vulnerability.
Think about it, India just completely blew up its entire currency system. In a minute, no notice, except to those in the know. The people will soon turn to other means of exchange. Look for tremendous US$ currency demand. By the way, didn't the dollar hit a new 13 year high?
For a long time, I’ve been wondering about creating a “super currency”, backed by specie. It would have several important elements.
A question that is often raised, but then shrugged off, is “Why do gold and silver coins have a face value lower than the value of the metal in them?”
Since the government is, in effect, selling those coins, why not combine their metal value with an additional fiat value? For example, right now gold is about, roughly $1,200 an oz. So why not make a one ounce gold coin denominated at $5,000? As long as it was legal tender, that value would never change. But right off the bat, the government would make $3,800 on its sale.
But that is an expensive coin. So instead of just gold and silver, other precious and semi-precious metals were used as well, for lower denominations?
Platinum is too rare and valuable to industry to coin, but what about silver, of course, and palladium, rhodium, copper, nickel, etc. Again, all with denominations greater than the value of the metal.
But there is more to this. Canada makes a gold Maple Leaf coin of exceptional purity. So pure it can be laser engraved with a holographic maple leaf. Because pure gold is so soft, such coins are packaged in protective cases prior to being sold, and their owners keep them in there.
So if you are going to over-denominate coins, if their metal is valuable, they should be of great purity. For lesser metal coins, minimal alloy should be used just to protect their hardness, so they can be used as currency.
While paper currency is of course cheaper to make, it is also fragile, lasting only for months to a year or two. But coins stay in circulation for decades, so in the long run, cost less.
This also matters with the relative scarcity of paper to back our daily retail trade. Copper is currently at about $2.50/lb. Some years ago it got to as high as $4.00/lb. So how about a $20 copper coin? It would replace a $20 bill, 2 $10 bills, 4 $5 bills, or 20 $1 bills. A once ounce, 16 blanks for $2.50, or even half ounce coin, 32 blanks for $2.50.
Suddenly we would have enough real currency to back our economy.
Why don't governments issue "over-denominated" coins? Well, why bother? Fiat currency is fiat currency. If the mint stamps out a lead coin and engraves $100 face value on it, it is worth $100. In effect that is what they are doing anyway with paper currency. Why spend the extra money on procuring precious metals to include in a coin if the fiat value is the same no matter what metal you use. All you are doing is increasing the cost of production when you don't have to.
As for the silver Maple Leaf and it's US counterpart the silver Eagle, I see them as excellent hedges. Another fantastic advantage is that you can buy them, and gold coins, over the counter for cash at many coin dealers in Canada. There is no tax on these transactions and no paper trail.
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