Trump’s Next Battle – in Washington

Trump’s Next Battle – in Washington by Bill Bonner

TRUMP HOTEL, New York – Trump’s rambling army – professionals, amateurs, camp followers, and profiteers – is marching south, down the I-95 corridor.

There, on the banks of the Potomac, it will fight its next big battle.

But hold on a minute… First, a report from the subcontinent…

India just pulled the plug on cash…

The country’s prime minister, Narendra Modi, has made all 500- and 1,000-rupee notes illegal. (In dollar terms, 500 rupees works out at about $7.50. And 1,000 rupees works out at about $15.)

Indians have been ordered to either deposit them with banks by year-end or forfeit them.

In one fell swoop, Modi has taken 86% of India’s physical cash out of circulation.

Monetary Breakdown

Sources on the ground give us a preview of what a monetary breakdown looks like. An eyewitness reports:

I am in Tamil Nadu, in the south of India. And here, as in every other state in the country, queues of people clutching wads of currency stretch halfway down the street.

Elsewhere in the country, trucks line the sides of the roads… silent. Their drivers ran out of cash to pay for food and gasoline.

Bloomberg Markets has more details:

More than half of an estimated 9.3 million trucks under the All India Motor Transport Congress have been affected as drivers abandon vehicles mid-way into their trip after running out of cash…

That adds to the worries of a government battling to keep cash dispensing machines running after efforts to ease withdrawals failed to keep pace for the fifth straight day. After a teary-eyed emotional appeal to citizens to bear some pain and back the fight against corruption, Modi on Monday defended his move to withdraw 500-rupee and 1,000-rupee notes.

It’s easy to cause a disaster. And there are many ways to do it. The Indian government has decided it would get rid of its most useful currency to fight “corruption.”

What really happened is that it found it difficult to collect taxes in a country where so much commerce takes place in cash, off the books. So it wants to clamp down.

But by banning the most popular notes – which make up the vast bulk of the cash economy – it has brought commerce to a halt.

Permanently Skewed

Let’s not get distracted. Here at the Diary, we do not like to get involved in politics.

But this is a special time in the history of our planet – a time when politics will decide what kind of disaster we face.

Simplifying, if Congress holds the line against Trump, we will have a deflationary disaster. If it goes along with him, the disaster will be more of the inflationary variety.

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Bill Bonner founded Agora Inc. in 1978. Since then, it has grown into one of the largest independent newsletter publishing companies in the world. Bill also co-wrote two New York Times bestselling books, Financial Reckoning Day and Empire of Debt, In his latest book, Hormegeddon, Bill describes what happens when you get too much of a good thing in the sphere of public policy, economics and business. This new newsletter is unlike anything else published in America today. Now in this industry, Bill Bonner has agreed to share his secrets and insights every month. It’s like having a super-wealthy uncle share his best ideas, insights and wisdom about business, relationships, investments, trends, developments, ideas and more.