Why Billionaire “Philanthropist” Bill Gates Loves India’s Demonetization Program

Why Billionaire “Philanthropist” Bill Gates Loves India’s Demonetization Program by Don Quijones

The profit motive in the War on Cash.

For the last 12 days, India has been turned into the world’s biggest open-air laboratory for extreme financial experimentation, after the Modi government decided, at the drop of a hat and apparently without warning even the banks, that the two biggest denomination notes were all of a sudden worthless, to be replaced by new notes.

Before Modi’s fateful decision, on Nov. 9, the 1,000 rupee ($14.67) and 500 rupee ($7.33) notes accounted for 86% of India’s cash economy, which itself represented well over 90% of the country’s retail transactions. The result has been widespread financial and economic chaos. Consumption in the cities dropped considerably. In the countryside, where bank branches are few and understaffed, the economy has ground to a shuddering halt. As the WSJ reports, for many the last remaining lifeline has been the barter economy:

Rice, abundant after the autumn harvest, has become a common medium of exchange. Rice for lentils, rice for potatoes, rice for cooking oil, rice for salt.

As is now abundantly clear, the government did not do all its homework before unleashing this demonetization drive. It completely overestimated the country’s readiness for such a radical move. The newly designed cash bills don’t even fit in the ATMs. “You needed to have almost a military-style remonetization effort” to get the new bank notes out, says Partha Mukhopadhyay, an economist at the Centre for Policy Research in New Delhi. “That hasn’t happened.”

Even Kenneth Rogoff, the Pinceton economist who advocates the abolition of physical currency in advanced economies, has expressed reservations about the government’s methods, arguing that a more gradual phase out of the large denomination bills would have had a much less disruptive impact on an economy in which well over half of the population is unbanked.

But in India, a large cross-section of the professional classes supports the government’s anti-corruption drive, in spite of the disruption it has caused. How long they remain supportive will entirely depend on the legislation’s impact on corruption at the top of Indian society as well as the government’s ability to restore some semblance of order.

Continue Reading/Wolf Street>>>

Sharing is caring!

Author Image

Wolf Richter

In his cynical, tongue-in-cheek manner, he muses on WOLF STREET about economic, business, and financial issues, Wall Street shenanigans, complex entanglements, and other things, debacles, and opportunities that catch his eye in the US, Europe, Japan, and occasionally China. WOLF STREET is the successor to his first platform… TP-Title-7-small-200px …whose ghastly name he finally abandoned in July 2014. Here’s the story on that. Wolf lives in San Francisco. He has over twenty years of C-level operations experience, including turnarounds and a VC-funded startup. He earned his BA and MBA in Texas and his MA in Oklahoma, worked in both states for years, including a decade as General Manager and COO of a large Ford dealership and its subsidiaries. But one day, he quit and went to France for seven weeks to open himself up to new possibilities, which degenerated into a life-altering three-year journey across 100 countries on all continents, much of it overland. And it almost swallowed him up.