Life after Demonetization

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Demonetisation is a channel of wealth transfer. It has become death to most and life to a few. After demonetisation can be gaze into the crystal ball and peep into our future?  Where is this massive wealth transfer taking us?  We are told that it will bring a golden future for the poor.  It is portrayed as a war on corruption and black wealth? Is it truly so? Will the wealth that is exchanged reach the poor? Will it reach us, the middle class?  The answers to these important questions may not be affirmative. Do we stand to lose and if so how much and with what consequence? These are important questions. But they do not have easy answers. Hence, we will have to ask a vital economic question: What has demonetisation done to us? To answer this question, we will have to understand that the currency that we are using. The currency is fiat money. It is not backed with gold or silver that would fix its value. It creates value and wealth though our economic activity. Wealth here is used in the most general sense. Fiat money has value only by virtue of the declaration of the government. This is why we cannot identify it with currency, value and wealth.  

 We have to take into account the difference between currency, value and wealth.  There is a close relation between them yet there is undeniable difference between.  Wealth is more than currency. Currency helps us to create value and wealth. The value of wealth stays largely constant. But various factors affecting value creation leads to the rise and fall of our wealth holdings.  Has demonetisation affected our value creation? The less cash condition that we are all subjected to as a result of demonetisation has debilitated our possibilities value creation and our wealth creation is suffering.   Does this mean that in some way the Government is stealing our wealth? The answer is again not easy. There are already some strong voices positioning it as a theft. It is called economic theft. The fact that value of our money that is recalled and recorded in our accounts in the banks  will remain largely frozen and not available to  us  except via digital channel  for value creation means we will not be able to create wealth from it. Therefore, possibilities of value and wealth creation are locked away from us. Hence, it is a deprivation and as such is immoral and worthy of condemnation. 

What did demonetisation take away from us? Did it take away our wealth, value or  currency? It is obvious that it took away our currency.  What is it doing to our economic life?  What is this taking away of our currency doing to our wealth and value creation?  Is our wealth being transferred to someone else?  Now that our high denomination currency is being called back through demonetisation, it will enable banks to lend more money. Moreover, the restrictions that are imposed on withdrawal of our own money also will keep the value that we have created out of that money largely in a frozen condition. This means our wealth will remain stagnant. While the value that we created and stored in the banks is up for grabs. It can be loaned for further value and wealth creation. This is how banks earn their money. They lend loans.  But who will get access to these loans? Will the ordinary people get opportunity to empower themselves and build wealth? Will the bank entrust their money to the poor?  Our history does not seem to point in this direction. Loans are offered to the bold and the rich. The famers get crumbs that remain after the rich had their full. The poor remain forgotten. 

Loans are offered if they can be backed by value. The really big loans are given on the basis of speculative value that is construed as being created by the capital that is invested as loans. This speculative assessment can fail. We have already seen this in the case of fifty seven big time loan defaulters in our country. Even before the fifty days time had come to an end, we already saw how the Government has written off the loans of the big defaulters as non-performing assets. What does this action tell us? It simply tells us that the Government is bending backwards to assist the super rich. The super rich got more than their share. But we are kept waiting for our fifteen lakhs  drawn from the spoils of black money.  Hence, it is difficult to think that demonetisation is going to produce any level playing field for all Indians. Demonetisation is like a coin that is manipulated to read heads when tossed. It is a killer. It has taken the precious lives of hundreds of Indians. No super rich can be seen in the lines to deposit and exchange their old notes. Neither is there any substantive windfall of black money.  This only shows that demonetisation has further widened the gap between the haves and have-nots in our country. It has posed insurmountable huddles for the cash dependent poor.  Hence, the rhetoric of Government is falling flat on the ground. Life after demonetisation has not been easy. Almost, every economic activity has come to a standstill. With no unearthing of any significant black money and no sustainable infrastructure to go digital, along with the digital divide, demonetisation is all set to have long dark afterlife. 

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Hypocrisy is the tribute that vice pays to virtue.

- Fr Victor Ferrao