When Keynes echoed Lenin’s dictum that “their was no subtler, nor surer means of overturning the existing basis of society than to debauch the currency,” he clearly never dealt with the hubris of refined credentialed technocrats; for the mandarins of New Delhi have dealt a severe blow to the prestige and promise that was Modi. The fragile and precious trust that underwrites an institutional social compact is easily destroyed, yet perilous to fix. Managing the nations money supply is nothing compared to the formal restoration of implied trust embodied in a currency. This isn’t something Modi can address nor fix, its simply beyond him and his handlers.
The overnight declaration, invalidation of two currency notes, the 500 & 1,000 rupee notes accounted for nearly 86% of all circulating cash in India, was pronounced worthless on November 8. Why was this done? It was done to stem a social, political trend of autonomy endemic to liberty. Under the ideological banner of ‘black money‘ the Hindu’s have rent themselves. This significant monetary shock is permanent and fraught with profound geopolitical consequences.
The talk of implementing ‘Cold Start‘, a blitzkrieg doctrine of hammering northern Islamists has bad timing. Although welcomed, this military doctrine comes as stone throwing Kashmiri’s have disappeared. Peshawar has underwritten a campaign of counterfeiting to harass India; they’re gone now with the disappearance of the rupee. This is significant, if only to score the profound ideological animus between Islamabad and New Delhi. Now that Kashmir is overtly known as artificially politicized, India can try to pry open new policy initiatives to address colonial, ethnic problems that were endemic to partition. If the Irish could succeed at Downing, then the Hindu’s can try their wares at Islamabad.
An easier and more secure line of monetary policy engagement would have sought to solicit Indian citizens to openly identify with nationalist policies, in effect co-opting a divergent, undifferentiated India into a concentric effort evidenced in travel, education, infrastructure etc. . Modi’s advisors should have identified regional affinities and moved outward, openly enveloping the nation. But like all socialists and authoritarians, the BJP spoke AT the nation, effectively commanding them.
Both Modi, the Central Bank & India LOST.