Demonetization

On the day that America voted, Indian PM Modi announced that 500 and 1000 rupee notes would no longer be valid currency. Everyone had until the end of the year to exchange them at the banks.

The policy was announced as a way to flush out private stockpiles of cash, and to shut down criminal and terrorist groups using forged notes. But as the chaos created by the announcement refused to subside, a new motivation was introduced: this was a chance for India to go digital and become a cashless society.

This immediately aroused my suspicion. In the western media, the abolition of cash has been advocated by an Ivy League professor who has previously worked at the IMF and the Fed. One of his star students is now economic advisor to an Indian state...

Like Modi, he says it's a way to flush out untaxed money. But apparently, one of his motivations is that this will allow central banks to impose negative interest rates. You see, if cash is an option, people might take their money out of the banks and weaken the impact of the policy. But if cash is not an option, they have to just sit and watch their savings dwindle; or else start spending, the objective of the policy.

I should clarify that, having seen what happened in the years since the financial crisis of 2008, I instinctively hate and distrust these people. They are the high priests and apologists of an ideological system as corrupt and dogmatic as the old Soviet system - so says my intuition.

Steve Keen has argued that a dogmatic belief that there could never be too much debt - basically ignoring the effects of compound interest - was a precondition of the crisis occurring. Another lopsided dogma may be the belief that consumption is the key to economic growth - ignoring the centrality of *production*. Instead, the tenured witch-doctors think more spending is always the answer, and will even destroy people's savings in order to enact their crackpot cure.

Perhaps in the long run, Volcker's high American interest rates of 1981-1982, and Modi's demonetization of 2016, mark the beginning and the end of an ideological epoch uniquely friendly to financial capitalism. Volcker's recession, meant to chase away the last remnants of 1970s stagflation, was the beginning of neoliberalism. Modi's demonetization may actually have some positive effects, but it coincided with the victory of Trump, who promises to replace neoliberal globalism in its land of origin, and hence throughout the world system, with mercantile nationalism. So perhaps this is the last hurrah of the neoliberal nomenklatura, as well as the start of something new.