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India Now Taxes Her Citizens For Holding Cash

This is incredibly brazen and troubling news.  The government of India recently made one of the boldest moves in recent times against cash.  They have essentially “probabilistically devalued” the 500 and 1000 rupee notes in circulation.  A defacto cancellation of those notes  If anyone holding those notes tries to deposit them into a bank, their value has been decreased by as much as 90%.  Wow a tax for holding cash?   What is the reason for this new regulation?  They claim it is an attempt to crack down on black or underground markets, tax evaders and corruption.

What has the affect been on the economy of India?  According to one report: “US dollars are soaring in premiums on the street. There is a serious risk that the government has shaken the confidence of the people to such a degree, that they trust the US dollar more than their own currency.”  Indians are voicing their displeasure with the government’s actions by protesting.  These protests have unleashed real chaos in India.  Many are already calling this “experiment” a complete disaster.  Why do you ask?  Because this “experiment” has brought the economy to a virtual standstill. Food stores are near closing because the customers have no money. Small and medium-sized enterprises have stopped functioning because the invoices are not paid for.However this has all been good news for the West.

Additionally, literally hundreds of thousands of people have been storming ATMs all over India trying to get cash reports the Hindustan Times.  People are trying to get their money out of the banks.  To a large degree they are unable to do it given the current Chaos.  As a result the Indian economy is turning to the dollar. Physical dollars are commanding a premium because they can politically trust the dollar and not their own currency.

You might not know but the Japanese would devalue their outstanding currency each time a new emperor came to power.  The citizens responded by using rice and Chinese coins. Japan effectively lost the ability to even issue coins for 600 years.  Is this in the future for India?  I do not know, but like I have said I believe this is all an experiment like the bail ins in Cyprus.

A few questions to consider:

  1.  Would you have access to you money if a similar policy was implemented in the US?
  2.  Do you like be in control of you money?
  3.  Is it possible for you government to do have similar policies?
  4. Are there any safe places that would protect you from such actions by your government?
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