A New Report Raises Big Questions About Last Year’s DNC Hack

Written by Patrick Lawrence of The Nation,
It is now a year since the Democratic National Committee’s mail system was compromised – a year since events in the spring and early summer of 2016 were identified as remote hacks and, in short order, attributed to Russians acting in behalf of Donald Trump. A great edifice has been erected during this time. President Trump, members of his family, and numerous people around him stand accused of various corruptions and extensive collusion with Russians. Half a dozen simultaneous investigations proceed into these matters. Last week news broke that Special Counsel Robert Mueller had convened a grand jury, which issued its first subpoenas on August 3. Allegations of treason are common; prominent political figures and many media cultivate a case for impeachment.
The president’s ability to conduct foreign policy, notably but not only with regard to Russia, is now crippled. Forced into a corner and having no choice, Trump just signed legislation imposing severe new sanctions on Russia and European companies working with it on pipeline projects vital to Russia’s energy sector. Striking this close to the core of another nation’s economy is customarily considered an act of war, we must not forget. In retaliation, Moscow has announced that the United States must cut its embassy staff by roughly two-thirds. All sides agree that relations between the United States and Russia are now as fragile as they were during some of the Cold War’s worst moments. To suggest that military conflict between two nuclear powers inches ever closer can no longer be dismissed as hyperbole.
All this was set in motion when the DNC’s mail server was first violated in the spring of 2016 and by subsequent assertions that Russians were behind that ‘hack’ and another such operation, also described as a Russian hack, on July 5. These are the foundation stones of the edifice just outlined. The evolution of public discourse in the year since is worthy of scholarly study: Possibilities became allegations, and these became probabilities. Then the probabilities turned into certainties, and these evolved into what are now taken to be established truths. By my reckoning, it required a few days to a few weeks to advance from each of these stages to the next. This was accomplished via the indefensibly corrupt manipulations of language repeated incessantly in our leading media.

This post was published at Zero Hedge on Aug 10, 2017.

Berlin Calls For “Countermeasures” To US Sanctions Against Russia, Hints At Trade War

While the Pentagon may be already contemplating its next steps in the escalating conflict with Russia, which as the WSJ reported will likely involve supplying Ukraine with antitank missiles and other weaponry – a red line for the Kremlin not even the Obama administration dared to cross – there is minor matter of what to do with a suddenly furious Europe, which as we discussed previously, has vowed it would retaliate promptly after Trump signed the anti-Russia legislation into law, due to allegations it was just a veiled attempt at favoritism for US-based energy companies.
And, sure enough, on Monday, the Germany economy minister said that tew penalties against Moscow proposed by US lawmakers violate international law and officials in Brussels should consider countermeasures.
Speaking to Funke Mediengruppe newspaper, Brigitte Zypries said that “we consider this as being against international law, plain and simple.” She added that “of course we don’t want a trade war. But it is important the European Commission now looks into countermeasures.”

This post was published at Zero Hedge on Aug 1, 2017.

Can Japan End its Easy-Money Addiction?

The shock landslide defeat of PM Shinzo Abe’s Liberal Democratic Party (LDP) in the recent Tokyo metropolitan elections – and the triumph there of Tokyo Governor Koike’s new party (Tomin First) – has lit a faint hope that the radical Japanese monetary expansion policy could be on its way out. The flickering light though is not strong enough to soothe the mania in Japan’s carry trades and so the yen continued to slide in the aftermath of the elections. Between mid-June and early July the Japanese currency depreciated by some 5% against the US dollar and 10% against the euro.
The perception in currency markets is that Japan will not be embarking on monetary normalization this year or next, in contrast to Europe where ECB Chief Draghi has hinted that the train (to monetary normalization) will start next year, even though the journey promises to be very slow. The US train to normalization continues at a glacially slow pace including some periods of reverse movement. Moreover the monetary climate prior to the journey commencing is even more extreme in the case of Japan than in Europe or the US.
It was possible to imagine that the shock election setback for the LDP could have caused Shinzo Abe to withdraw support from his money-printer in chief, Bank of Japan governor Haruhiko Kuroda (whose term ends in April 2008), thereby signaling an early end to negative interest rates and quantitative easing. But markets in their wisdom have concluded this is not to be. Many elderly Japanese are pleased with their stock market and real estate gains even though they complain about negative interest rates and the threat of inflation. In any case it was young voters, responding to the stink of alleged corruption scandals, who turned out en masse for Governor Koike’s new party.

This post was published at Ludwig von Mises Institute on July 17, 2017.

Has Super Mario Draghi Met His Match?

And this might become a problem for the Fed.
ECB President Mario Draghi wields more power than just about any other public official in Europe, perhaps even including Angela Merkel. The organization he heads not only controls the monetary policy levers of the entire Eurozone, it also supervises the region’s 130 biggest banks. As we’ve seen in recent weeks, it even has the power to decide which of Europe’s struggling banks get to live and which don’t.
Yet it is answerable to virtually no one. Until now.
Emily O’Reilly, the EU Ombudsman, an arbiter for the public’s complaints about EU-institutions, has just sent Draghi a letter asking him to explain his role in the potentially compromising Group of Thirty (G30) and how he makes sure that he does not divulge insider information or runs into conflicts of interest. The tenor, tone and direction of O’Reilly’s inquiries make it clear that she means business.
The Washington-based G30 was founded in the late seventies at the initiative of the Rockefeller Foundation, which also provided start-up funding for the organization. Its current membership reads like a Who’s Who of the world of global finance. It includes current and former central bankers, many of whom now work or worked in the past for major financial corporations, such as:

This post was published at Wolf Street on Jul 10, 2017.

Credit Agricole Demands 400,000 Euros For Premium Research Package

As the global equity research market continues to wrestle with how they will comply with the European Union’s MiFID II regulations, we noted a new study from McKinsey & Co. last week which effectively predicted that investment banks will have no choice but to fire a ton of equity research analysts who write a bunch of stuff that no one ever reads…which seems like a reasonable guess.
For those who have managed to avoid this particular distraction, the global equity research industry is in the midst of a major disruption which has been brought on by the European Union’s MiFID II regulations, enforced from Jan. 3, which aim to tackle conflicts of interest by requiring asset managers to separate the trading commissions they pay from investment-research fees.

This post was published at Zero Hedge on Jun 30, 2017.

Shock, Horror: ECB Not as ‘Independent’ as it Claims – Report

Transparency International whacks at a central bank. The European Central Bank has found itself in the rare position of having to defend itself in the public arena following the release of a scathing report on its perceived lack of political independence. The report, published by anti-corruption watchdog Transparency International, argues that the institution has accrued new power and influence in the wake of the financial crisis but its code of conduct has not kept up with that newfound clout.
It even suggests that the ECB should withdraw from the Eurozone’s Troika of creditors, precisely at a time that calls are rising for the creation of a European Monetary Fund.
‘The extraordinary measures taken by the ECB since 2008 have tested the ECB’s mandate (to ensure price stability) to breaking point,’ Transparency International EU said. ‘The ECB’s accountability framework is not appropriate for the far-reaching political decisions taken by the Governing Council.’

This post was published at Wolf Street on Mar 29, 2017.

Macedonia Reject Soros & the EU Socialism

For 26-days straight, thousands of people have taken to the streets in order to send the message to Soros and European leaders that the people of Macedonia are a sovereign nation who utterly reject the left-wing agenda to divide the nation and bring a socialist-Muslim coalition to power. Johannes Hahn is an Austrian politician, who since November 2014 is Commissioner for European Neighbourhood Policy & Enlargement. He went to earlier last week to Skopje, in Macedonia, where he held talks with political representatives in a bid to contribute to a solution to the political deadlock there to get Macedonia to join the EU.
There was considerable corruption where the Prime Minister Nikola Gruevski was forced to resign in December 2015. The EU brokered elections in December 2016 to end the protests against the government of Gruevski. The December 2016 elections have left a transitional government was installed including from 20 October 20th, 2015 with the two main parties, VMRO-DPMNE and the Social Democratic Union (SDSM).

This post was published at Armstrong Economics on Mar 27, 2017.

European North v South

Dijsselbloem’s comments regarding the Southern Europe reflect the political bias – not the general public at large within Europe. There are different cultures throughout Europe. In some places people will not cross the street until a light changes even if there are no cars. Other parts are like New York, lights are optional. There are many cultural differences in general between north and south, but even more between members. Even in Germany there is a divide between north and south.
The blame does NOT lie in cultural differences, corruption, or even easier spending in the south and excessive pensions as in Greece. The problem that has pushed Europe to the brink is:
(1) this failed idea that ending European War can be achieved by federalizing Europe. That will not change the cultural differences. Even in the United States, there are cultural differences between the Bible Belt (anti-Abortion & anti-Gay Marriage) compared to California or New York. It is the Federalization of the United States and the attempt to impose one culture upon the whole every since the Great Depression that is causing tensions within the United States. The same is TRUE within Europe.

This post was published at Armstrong Economics on Mar 24, 2017.

Russian Billionaire Deripaska Responds To AP Story On Manafort Ties

In the latest attempt to stir the pot over allegations that Trump and members of his closest circle had ties to Russia, on Wednesday, the AP unearthed a 2005 memo from former Trump campaign manager Paul Manafort – who was let go by the Trump campaign in the summer to Russian billionaire Oleg Deripaska, who became Russia’s richest man under Putin and whose key asset is a 48% stake in Russian aluminum giant Rusal, according to which Manafort would boost Putin’s agenda and reportedly undermine anti-Russian opposition across Europe, the U. S. and former Soviet republics.
“We are now of the belief that this model can greatly benefit the Putin Government if employed at the correct levels with the appropriate commitment to success,” Manafort wrote, adding it “will be offering a great service that can re-focus, both internally and externally, the policies of the Putin government.”
As a reminder, Manafort worked as Trump’s unpaid campaign chairman last year from March until August. Trump asked Manafort to resign after AP revealed that Manafort had orchestrated a covert Washington lobbying operation until 2014 on behalf of Ukraine’s ruling pro-Russian political party.

This post was published at Zero Hedge on Mar 22, 2017.

New European Regulations Set To Crush Equity Research Budgets By $300 Million

Literally no one knows the true ‘value’ of equity research, not even the investment banks that are selling it. Up until now, equity research has been treated as a ‘freebie’ given away to institutional clients in return for trading commissions but that is all about to change thanks to the European Union’s MiFID II regulations, which require asset managers to separate trading commissions from investment-research payments.
Unfortunately, at least for the Investment Banks of the world, while the cost of generating equity research may be substantial, it turns out that the true ‘value’, as defined by institutional clients’ maximum willingness to pay for reports, may be much less. Which is shocking given the creativity required to constantly generate new variations of daily reports politely suggesting that you “Buy The Fucking Dip.”
As Bloomberg notes today, the regulatory change slated to take effect next January could cost the I-banks $300 million in fees.
Asset-managers in Europe and the U. S. will probably cut more than $300 million from research budgets in anticipation of regulations aimed at rooting out conflicts of interest in the market for investment information.
That’s according to a survey of 99 fund managers and traders conducted by consulting firm Greenwich Associates, which assessed the shake-up coming to the multi billion-dollar market for investment research over the next year.
The European Union’s MiFID II regulations, which require asset managers to separate trading commissions from investment-research payments, will have a ‘clearly negative’ impact on the amount of commission money that is spent on research and advisory services, according to the Stamford, Connecticut-based firm’s findings released Tuesday. While the budget cuts will be ‘relatively modest’ at individual asset-managers, research providers across the board fear the new law will prompt ‘a substantial decrease’ in buy-side spending.

This post was published at Zero Hedge on Mar 15, 2017.

All Washington blames Putin and calls for investigations of Russian villainy: John Batchelor interviews Stephen F. Cohen

The character of events from week to week, and as discussed by both Batchelor and Cohen, is manifestly worsening. While the proxy wars are stabilizing to some little extent, we see the political wars in governments as fall out of the New Cold War in a constant state of escalation. Cohen notes a New York Times piece by Charles Blow that coined a name for what is happening as an ‘Era of Suspicion’ and the author considered this a positive thing for the country – where all the interest groups are being forced by the hate and fear campaign to align with the anti-Russian narrative whether it serves their interests or not. This past week Batchelor brings up the news about the Estonian Ambassador, Eerik Marmei and the Ukrainian Minister of Foreign Affairs, Pavlo Klimkin who spoke to a Senate subcommittee about Russia disrupting elections in Europe, and the danger of cyber warfare by Russia. Also mentioned were the Trump charges that Obama had his Trump Tower ‘bugged’. Cohen then launched into what the consequences of this new ‘Era of Suspicion’ and the professor describes how the pressure to conform has influenced all the politicos (Flynn debacle) and the masters of industry in the United States, who want to have business dealings with Russia, into remaining cautiously silent. These and other efforts are being used to isolate Trump and neuter or redirect any chance of dtente or even honest discussion of serious geopolitical events. It is working too – with Republicans also becoming divided. Some Republicans are looking at Vice President Pence for the president’s position.
Cohen also discusses the role of ‘expert consultants on Russia’ in the media and their efforts to vilify Putin and the Kremlin. All interviews using these people are factually untrue. The most egregious of these, for example, maintained that Putin was ‘deliriously happy that Washington was in complete chaos over Russian policies’. Batchelor exclaims that this is ‘complete rubbish’. It was also Batchelor’s opinion that it was serious that Trump did not mention Russia in his address to Congress. What this indicates is that dtente is getting much less likely. Cohen also mentions the resurrection of McCarthyism with a Committee of Un-American Activity being formed and concludes that disorder is the contrived tenure of modern Western diplomacy. In my opinion Trump has to decide whether folding to the will of his opposition will stop this campaign to remove him or will it show weakness that will lead to escalation. His reticence to talk about Russia may be testing the waters, or be showing weakness. Senator Graham, who talked with the president, seems to think the latter and the US will ‘push back’ against Russia. I think Trump is folding too.
The push back will see more support for NATO and perhaps more military help for Ukraine. Cohen discusses the quasi NATO presence now in Ukraine, and he also brings up a potential increase in US troop presence in Syria. He discusses the dangers of a combined military presence of US and Russian assets in Syria. Cohen then discusses the simple solution to ease the danger, and it really is simple. Disengagement. But Putin needs Washington (Trump) to cooperate. But Cohen now considers this as unlikely as he thinks Trump is folding to his opposition in Washington. In Ukraine the political and economic situation is worse and where President Poroshenko is having no control over the ukronazis – who are now embargoing coal imports from the Donbass. This hurts Kiev, but also illuminates the reality of a failing central government. A personal question: Will NATO continue to base troops there? It would mean contending with or working with nazis in a failed state environment? But would most of the West hear about it? That’s where we are, living behind a virtual information wall that George Orwell would immediately recognize.
From my point of view the Military Industrial Complex has shown no sense of danger in supporting a ‘confrontation for profit’ policy against Russia, and now the people of the West are effectively ‘walled off’ from learning about critical realities by a systemic corruption of the MSM. Washington is creating its own “Iron Curtain”. Not even discussions at the highest levels of Washington are tolerated unless they support the narrative. One wonders how long this can go on with the Military Industries dependent on tax dollars, and the financial sector and other interests looting the economy and destroying that same tax base. This becomes another reason to impose that ‘Era of Suspicion’ on the whole country; if one cannot advise or discuss an argument against war dangers (or government policies) without censure, then war becomes more inevitable in spite of the fundamentals that work against it. One could say, ‘unleash the dogs of war’ but first hugely increase the fiscal deficit.

This post was published at Audioboom

The Unrevolutionary Revolution

February in Romania has brought 27 consecutive days of protests against the current government, at a scale unmatched since the Revolution in 1989. In a record day, more than 600,000 people gathered in the capital’s Victory Square and around the country to overturn a decision by the current ruling party to decriminalize some acts of corruption and abuse of office. This decision was especially self-serving given the high number of party members already serving suspended sentences for similar graft offenses. News outlets around the world have covered the events using flattering words, describing the peaceful riots as a ‘poetry of international resistance’ and a ‘massive political awakening.’
The resilience – and moderate success – of protesters, in spite of the government digging its heels in and the temperatures dropping, has been undeniably impressive, and has demonstrated an energetic interest in pursuing justice, which, rightly employed, could become the driver of a much needed change in Romanian politics.
Yet at the same time, amongst the shouting against totalitarian measures aimed at changing the penal and civil code, other voices emerged as well. Equally numerous, and sometimes belonging to the same people, they call for stronger ‘democratic’ processes and offer public displays of affection for the European Union. Unsurprisingly, there have also been no mass protests against another fairly recent economic policy which forces supermarkets to ensure at least 51% of their grocery offers are of Romanian provenance. In this regard, many protesters might decry the ‘thieving multinational corporations’, and ask for a government crackdown on tax evasions, in order to provide for socialized healthcare and education.

This post was published at Ludwig von Mises Institute on February 27, 2017.

Eastern Europe & World War III

Europe could become the site of a new global war in the East as tensions build there against refugees and the economic decline fosters old wounds. The EU is deeply divided over the refugee issue and thus it is fueling its own demise and has failed to be a stabilizing force. After five days of demonstrations, Romania’s month-old government backed down and withdrew a decree that had decriminalized some corruption offenses. They were still acting like typical politicians and looking to line their pockets. After one month, the people have rising up saying ‘We can’t trust this new government.’
On the eastern border of the EU, only a few hundred kilometers from Berlin as well as Vienna, there is a growing danger that the world will stumble into a global war primarily from through the incompetence of the politicians in the EU as well as in the East. The EU is more concerned about punishing Britain and trying to hold on to overpaid political jobs that to address the real issues facing Europe.

This post was published at Armstrong Economics on Feb 8, 2017.

Free Market Economics and Crony Capitalism

In my last post, I made light of British columnist George Monbiot’s absurd charge that today’s free market economists and libertarians are part of an establishment crony capitalist system. A “progressive” friend of mine responded by asking: “Doesn’t big business wrap itself in the mantle of free markets? If so, aren’t exponents of free markets supporting crony capitalism? Aren’t they therefore responsible for the crony capitalist practices that beset us today?
The short answer to this question is that free market economists and libertarians are no more responsible for the willful distortion and misuse of their doctrines than Jesus is responsible for the bloody wars of religion of 16th and 17th century Europe. Adam Smith pointed out two-hundred-and-fifty years ago that business owners, especially big business owners, are not generally supporters of free markets, whatever they may claim. They find its disciplines too onerous; they try to escape them through one means or another, and subverting government through crony capitalist techniques is the tried and true way to do it.
Nor is it correct to think that crony capitalism is a particular phenomenon of our own day. Yes, it has grown by leaps and bounds in recent decades, thanks to ample financing provided by world central banks. But it has always been with us.
As I pointed out to my friend, crony capitalism is as old as the human race. It is the economic system embedded in tribalism and as such has been the dominant system for all of human history. Through the ages, powerful cronies latch onto political and economic philosophies and distort them in the process, but this is just window dressing.

This post was published at Ludwig von Mises Institute on Jan 14, 2016.

Nationalism, the United States, and Cyclical Crises

In the coming year, the United States will remain the overwhelmingly dominant geopolitical power in the global system, and President-elect Donald Trump will be at the helm. His presidency will mark a turning point as the first significant shift towards nationalism at the center of the US political system.
As explained in our 2017 forecast, this rise in nationalism is a global trend, and one of three critical consequences of the 2008 financial crisis that will play a pivotal role in shaping geopolitics in 2017. (The other two are economic stagnation and instability in export-dependent countries.) Its rise stems from the rejection of the internationalist model that has dominated international relations since the end of World War II.
In places like Europe, it is easy to see why internationalism is losing favor. It is less obvious for the US. The European Union (EU) put in place policies and regulations that prioritized the Union’s survival over national interests, and this inherently creates conflicts of interest between the bloc and member states.
This was exacerbated by the 2008 financial crisis. Member countries saw their economies crash while their hands remained tied by Brussels, which was slow to act and offered a narrow range of Band-Aid solutions.

This post was published at Mauldin Economics on JANUARY 2, 2017.

“It’s Corruption On Steroids” – A Look Inside The El Monte, California Public Employee Pension

El Monte, California is a city of roughly 100,000 residents in East Los Angeles, many of whom struggle to make ends meet with a median household income of ~$39,000 and nearly 25% of people living below the poverty line. But while most of the people of El Monte struggle to meet monthly expenses, the city’s public employees are living the high life courtesy of one of the most egregious taxpayer funded pension plans in the country. Just ask the retired City Manager, James Mussenden, who told the LA Times that he gets paid $216,000 per year in retirement to tour the world on extravagant golf trips.
The retired city manager of El Monte collects more than $216,000 a year, plus cost-of-living increases and fully paid health insurance. ‘It’s giving me an opportunity to do a number of things I didn’t get to do when I was younger, like travel to Europe, take some things off my bucket list,’ Mussenden, 66, said recently. He even flew to Scotland to play the famed Old Course at St. Andrews, a mecca for golf enthusiasts.
Mussenden recognizes that few Americans have pensions anymore – least of all the El Monte taxpayers who are funding his retirement. So while he enjoys his monthly retirement check, he’s discreet about it.
‘The guys I play golf with, they get very angry about my pension because they don’t have anything like it,’ he said.

This post was published at Zero Hedge on Jan 1, 2017.

Italy Banking Crisis is Also a Huge Crime Scene

Toxic loans as a result of corruption, political kickbacks, fraud, and abuse.
The Bank of Italy’s Target 2 liabilities towards other Eurozone central banks – one of the most important indicators of banking stress – has risen by 129 billion in the last 12 months through November to 358.6 billion. That’s well above the 289 billion peak reached in August 2012 at the height of Europe’s sovereign debt crisis.
Foreign and local investors are dumping Italian government bonds and withdrawing their funding to Italian banks. The bank at the heart of Italy’s financial crisis, Monte dei Paschi di Siena (MPS), has bled 6 billion of ‘commercial direct deposits’ between September 30 and December 13, 2 billion of which since December 4, the date of Italy’s constitutional referendum.
Italy’s new Prime Minister Paolo Gentiloni, who took over from Matteo Renzi after his defeat in the referendum, said his government – a virtual carbon copy of the last one – is prepared to do whatever it takes to stop MPS from collapsing and thereby engulfing other European banks. His options would include directly supporting Italy’s ailing banks, in contravention of the EU’s bail-in rules passed into law at the beginning of this year. Though now, that push comes to shove, the EU seems happy to look the other way.
While attention is focused on the rescue of MPS, news regarding another Italian bank, Banca Erturia, has quietly slipped by the wayside.

This post was published at Wolf Street on Dec 18, 2016.

What Is Quitaly?

First there was Grexit, followed by Brexit, and now there’s Quitaly. What is Quitaly? It’s Italy’s referendum that could decide if the struggling country will change its constitution.
Today’s (Sunday) Quitaly vote for constitutional reform is deemed by many as the most significant European political event of 2016.
Behind today’s vote is Italy’s floundering economy. Over the last two decades, Italy has seen virtually no growth and sky-high unemployment. Plus, Italian goods have become less and less competitive in export markets.
Italy’s Prime Minister Matteo Renzi has campaigned for a ‘yes’ vote in today’s voting, which he says will make governing easier in the country.
Reforms being voted on today would remove some of the Senate’s power. That means proposed laws would only need approval from the lower house of parliament. Under the current system, both houses must approve laws.
In a bold move, Renzi is putting his political fate on the line. He has said he would leave office if the ‘yes’ vote loses.
Lobbying for ‘no’ is the populist party Five Star Movement (5SM). The 5SM’s goal is to block reforms that would streamline Italy’s public administration and leave the current checks required in place.

This post was published at Wall Street Examiner on December 4, 2016.

5 Questions, Answered about Italy’s Referendum

This Sunday, December 4th, Italy will hold a constitutional referendum.
And while this isn’t a referendum to remain or leave the European Union, like the United Kingdom’s referendum in June, it still matters. European markets, the future of trade, the economy and global relations all could shift depending on the outcome.
It behooves you to know what’s happening and what could happen as a result. You’d be forgiven, though, for not understanding what Sunday’s referendum is all about. One of the leading Italian research institutes, Demopolis, reported that nine out of ten Italians have not understood the upcoming referendum on constitutional reform.
***
What is the Italian Referendum and Why is it Important? Italy’s referendum will decide on a series of constitutional reforms that would considerably restrict the size and power of one out of the two houses of Italian parliament. This effort was drawn up to reform the country’s endemic corruption and inefficient systems of governing.
Italy’s current Prime Minister, Matteo Renzi, has lobbied strongly for a ‘yes’ vote, which would strengthen the central government, while weakening the regional provinces.. The Prime Minister has flip-flopped on his promise resign if voters in the country reject the referendum – but considerable speculation has indicated made Renzi’s exit still a possibility.

This post was published at Wall Street Examiner on December 3, 2016.

Modi’s Demonetization Is a Cure Worse Than the Disease

Next Tuesday will mark four weeks since Indian Prime Minister Narendra Modi made his surprise demonetization announcement that has sent shockwaves throughout the South Asian country’s economy. In an effort to combat corruption, tax evasion and counterfeiting, all 500 and 1,000 rupee banknotes are no longer recognized as legal tender.
I’ve previously written about the possible ramifications of the ‘war on cash,’ which is strengthening all over the globe, even here in the U. S. Many policymakers, including former Treasury Secretary Larry Summers, are in favor of axing the $100 bill. In May, the European Central Bank (ECB) said it would stop printing the 500 euro note, though it will still be recognized as legal currency. The decision to scrap the ‘Bin Laden’ banknote, as it’s sometimes called, hinged on its association with money laundering and terror financing.
Electronic payment systems are convenient, fast and easy, but when a government imposes this decision on you, your economic liberty is debased. In a purely electronic system, every financial transaction is not only charged a fee but can also be tracked and monitored. Taxes can’t be levied on emergency cash that’s buried in the backyard. Central banks could drop rates below zero, essentially forcing you to spend your money or else watch it rapidly lose value.
Inevitably, low-income and rural households have been hardest hit by Modi’s currency reform. Barter economies have reportedly sprung up in many towns and villages. Banks have limited the amount that can be withdrawn. Scores of weddings have been called off. Indian stocks plunged below their 200-day moving average.
Demonetization has also weighed heavily on the country’s manufacturing sector. The Nikkei India Manufacturing PMI fell to 52.3 in November from October’s 54.4. Although still in expansion mode, manufacturing production growth slowed, possibly signaling further erosion in the coming months.

This post was published at GoldSeek on 2 December 2016.