Wednesday, January 4, 2017


Dear All,

While appreciating the concerns of many friends about the value of promise printed on a currency note, I am not able to understand the cause for such concern because I think there is no demonetization in that sense. What I mean is that the currency holder has not been refused by RBI to pay the value. Whosoever has presented the old notes to a bank has either got the equivalent new notes already, or  will get them a bit later through his bank account. I agree that there is a temporary denial of right, but there is no refusal on the part of RBI. Then why such hue and cry? 

Can't we take it as an administrative measure of the Government to catch the tax evaders or to widen the tax net? May be the benefits of the exercise are not as per expectations, but at least an attempt was made. After all, so much has been said during past so many years about the parallel economy and the damage to the national interest being caused by such parallel economy. Then what the Govt. was expected to do? Should it have remained just a mute spectator?  Previous Governments could not muster the courage to take any drastic action against the tax-evaders and money launderers. If this Government had also continued with the same policy, all of us would have accused it of inaction? Therefore, I think that we should forgive the Government for the adverse effects of note-bandi because it was an honest attempt by the Government for tackling the menace of terrorism funding, fake currency and tax evasion, which was long overdue. I think it was done in good faith. However, I fully endorse the view that the Govt. must do everything possible to reduce the pain and hardships caused to the people by this process. The pain should not be allowed to prolong any further.

As regards cashless economy, the Government has already clarified that it is not aiming at cashless economy. It only wants less cash economy. That aim seems to be in the national interest and all citizens should support it. It will help in widening the tax net and bring more revenue to the Government, which can be spent on building roads, bridges, schools and hospitals.

R. K. Maheshwari

On Wed, Jan 4, 2017 at 8:54 PM, Supratim Basu <> wrote:
Dear Sarbajit,

While I significantly disagree with you over some of your socialist viewpoints (!), I applaud your stance and that of the IAC on this matter of the importance of cash for a free citizenry and the role of cash to keep fascists/statists/communists at bay. I also applaud the consistent stance that the IAC has taken on this matter, including calling out the RBI for its inability to honour the promise that is printed on the bearer notes (cash), causing many of us to wonder if the rupee note is any better than toilet paper, now.

I have read practically all the arguments that have been put forward by various people on this list and I would like everyone to consider the following:

1. Cash, in the form of either paper or coins, has the lowest cost in terms of friction costs in any economy - cash is the least expensive option to use while trading, compared with any other means - credit/debit cards, cheques, bank transfers, LCs, etc etc. This is one reason why "hundis" continues to flourish in our country.

2. Giving up cash for sole electronic transfer has to be the prerogative of the citizen - the state can not enforce this diktat. Those who are sheep and wish to be slaves or subjects of the state, rather than free citizens may voluntarily give up their option to trade (buy/sell) in cash. Those of us who want to remain free citizens, with the state as our agent and not our master, shall continue to want to trade in cash as an option. And, I say this as a person, who practically uses electronic means for over 90% of my transactions - but, with this attitude of the state and the emasculation of the RBI, I am going to increasingly use cash. If the state tries to sieze my/our option to pay in cash, tech savvy folks like us are going to shift to using dollars and crypto currencies for all major transactions - this would also have the affect of lowering economic growth in India.

3. Reneging on a promise that is written on each piece of currency note - and allegedly a sovereign guarantee (in the form of the RBI) - will have long term consequences for India and its economy. This will lead to a greater dollarisation/use of gold in the economy as well as an increase in the parallel economy, not a decrease. If you shake the faith of people in a currency issued by the sovereign, be prepared for all kinds of unexpected consequences.

The above is far as the theory aspect of freedom and why cash is important goes. One quote - "Those who would give up a part  of their freedom for security, deserve neither".

Now, as to the practicalities of the demonetisation move:

1. None of the three stated objectives of the move have been met - extinguishing black monies in the form of cash, rooting out fake notes and stopping terror funding. Out the 15.0tn of cash circulating in the high value notes, apparently all or MORE have been deposited with the banks. The RBI has not even published the official numbers as of Dec 30th, despite asking banks to submit all details on the 30th itself - including telling banks that they can not count these cash deposits as part of their quarter end cash balances. Once the cash deposited number reached Rs13.5tn, the RBI practically went mum or was gagged on further reporting. Sources indicate that MORE than Rs15.0tn have been returned to banks - what does that tell you?

2. There are no good options before the Modi govt re: cash deposits in banks. It can keep conducting a few raids here and there and announce seizures of a few tens or hundreds of crores - a drop in the bucket of the cash returned. And, if it increases the number of raids (a la VP Singh) significantly, then the economy will start slowing down even more, in any case - besides being a bonanza for the income tax officers.

3. Demonetisation does nothing to tackle the sources of corruption - unless the only structure of governance is changed from what we have currently - which is a colonial ruler-subject structure - nothing will change on the front of corruption. Neither petty corruption like in the RTOs nor mega corruption like power plants, road projects, ports or defence deals. Pls understand that unless the incentives are changed, people will continue to behave in exactly the same manner that they have been doing so far. Removing the ability of bureaucrats to "auction"/sign off on mega projects and dismantling the new licence raj that has once again been instituted is the only way to go.

4. To remove political corruption, you have to first understand reform the entire funding process of fighting elections - unless you have state funding of elections, politicians will necessarily have to indulge in corruption. Else, how will they fund their elections? It is only in this respect, I see a tiny glimmer of hope - Modi has asked ECI to look at broad reforms of the entire funding process of political parties and to consider state funding of elections - if he applies his mind seriously to his issue and executes on it, then this may turn out to be the real big bang reform that the country desperately needs today.

I can go on and on, writing about the horrible governance structure that we currently have - including colonial laws for the police and judiciary, not just the bureaucracy - but, I urge everyone to THINK from first principles of liberty and freedom and human behaviour. Also, to know that WE, the people ARE sovereign, and the state/government is only our agent/servant and NOT our master. It is foolish of us, the Masters, to let our Servants to lord it over us.

Thanks for hearing me out.


On 4 January 2017 at 19:17, Sarbajit Roy <> wrote:
Certain people (fools) are busy promoting cashless transactiions and
removing currency totally from the economy, without understanding the

#1 CASH / CURRENCY is a measure of the liability the Government has to
the people of India.  In simple terms.CURRENCY is a measure of how
much the Government owes to the citizens.Removing Currency implies
that Government owes people nothing and can do what they want and
print money at will.

MORAL -> FASCIST Govts desperately want currency and autonomous
Central Banks eliminated.

# 2 CURRENCY Notes must statutorily be exchanged for "value" - ie.
valuable coin. Previously this was gold, now its a mix of metals like
copper and stainless steel. The difference between the intrinsic value
(ie. metal price in open market) of the coin and its face value is the
Govt's tax (called "seignorage"). Typically whenever seignorage
exceeds 25-30% the public rejects paper currency in favour of stronger
currencies and there is monetary inflation. At present India's
seignorage is 70%. No wonder the India Rupee has depreciated 100%
against Dollar because smart Indians are "exporting" their value.

MORAL -> A Rafale fighter jet costs 2x what it did during Congress
time because we now have a chaiwala as PM instead of a former RBI

# 3 If there is no currency, then there is also no need for RBI (whose
only role is to regulate currency and money supply).  If there are no
Indian currency notes then people will devise ways and means (also
called Internet APPS) to ensure that transactions take place on
foreign websites in foreign currency but goods are "magically"
delivered in India. This is already happening Udtaa Punjab.

MORAL --> Why would anybody pay in Indian rupees on Indian websites if
a foreign supplier will anonymously deliver the goods to you without
bill after you have paid in dollars or Yen or BITCOIN ? The whole
online Pharmacy racket works on this principle.

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