You’ve probably all heard that Indian Prime Minister Modi ordered two of the most common high denomination bills (500 and 1,000 rupee) out of circulation and that they would no longer be legal tender after only a few days.

India’s economy is, well, not modern. Most people do not have or use credit cards. Only 53 percent have a bank account, and cash is still preferred for transactions. 43 percent of those who have a bank hadn’t used their bank account in the last year.

India also has a vast corruption problem and huge black and grey markets. The corruption makes it very difficult to fix problems, whether they be removing pollution from the Ganges, building enough toilets so people stop shitting in the streets, or anything else.

The black money (money never taxed or declared) market is supposed to comprise about 23 to 26 percent of the Indian economy. I don’t know if that’s a low estimate (I doubt it’s high).

Black money and corruption go hand-in-hand, for obvious reasons: You can’t declare the bribes you receive or gave, at least not with some way of laundering them first.

So cleaning up black money should help clean up corruption.

But many Indians live in the black money economy. It’s just that simple. Someone gives them money, they spend it, no one is declaring it.

De-monetization isn’t just about a couple of bills, it’s about pushing people towards electronic money, which can be easily tracked. There have even been suggestions of forcing beggars to use electronic money.

I regard this push to de-monetization as fundamentally insane in an economy like India’s, and it screams rentism. Yeah, black money can’t be taxed, but it also isn’t “bank-fee’d” away. When everything is electronic through banks (this isn’t bitcoin), then transaction fees and so on eat away at it. Every hand it goes through can make a little stick, and only very strict law can make it not happen.

It’s free money from the point of intermediaries; they have to do very little to get it once the system is set up.

It’s leeching. Nearly pure rentism.

I do not support universal e-cash for this reason. It is to easy to do rentism, and rentism (transaction taxes and fees) kills monetary velocity and kills economies. The move to transaction taxes (GST) is one of the things that took the oomph out of Western economies, and it was designed to do so, to reduce inflation by reducing spending.

Despite our era’s absolutely crazed fixation with inflation, there is NO evidence that inflation from about 10 percent a year on down does ANY harm to the economy in and of itself and there is plenty of evidence that moderate levels of inflation have a myriad of good effects on the economy.

Yes, people who earned their money in the past hate inflation. Too bad, past contributions should be discounted, and proper government policy can easily ensure that people are still taken care of and have enough. Crippling the economy so that people who earned their money years and years ago retain power long past their period of productive contribution is economic malpractice.

Give people who can’t/shouldn’t/don’t work a decent income through a pension/welfare plan or even a basic income system and get rid of all transaction taxes except for those where you deliberately want to slow down a particular type of economic activity, rather than all activity altogether. If it’s carbon you don’t want to see too much of, tax it. If oil inflation is the problem, figure out how to tax that, and so on.

Demonetization without very strict anti-rentism is a bad idea. India is a shitty country to try to demonetize due to its lack of technological infrastructure. It’s also not ideal, ironically, because of it is weak rule of law, vast corruption and huge inequality in both money and power.

India, in general, is far more of a clusterfuck than most understand, including many middle class Indians. Calories per capita are lower than they were 30  years ago, and most people are worse off than they were before neoliberal dogma took over.

Meanwhile, much Indian agriculture runs off of aquifers, and they are being depleted, leading to farmer suicides. Climate change is making the monsoons erratic, and it is causing problems with runoff from the Himalayas, which is to say, where northern India gets most of its water. Earlier this year, one of the source rivers for the Ganges was dry for weeks.

India is going to go pear-shaped. The question is when, but when it does, I expect hundreds of millions to die. The issue will be water, pure and simple, but India’s inability to deal with even basic problems like open defecation and pollution of the Ganges, means it literally cannot deal with longer term issues.

Reforms, which have, yes, created a robust middle class, have not improved the situation of most Indians. Yes, many stats say they have, but when I find out that calories/capita is down, I start thinking that GDP/capita is not measuring real welfare. It’s not like Indians were overfed 30 years ago.

I simply DO NOT believe many of the Panglossian statistics that people are using to say the world is the greatest ever. In many cases, I can’t prove it (and no, unless you have a 100k you want to give me, I’m not going to prove it), but I know, for example, that proverty stats in America are absolute bullshit: The poverty level has not kept up with increases in cost of living, especially in food, rent, and medicine. Not even close–and that’s using formal inflation statistics, which systematically understate price rises in various categories.

So, when the US stats are shit, and knowing what I know about how places like India and most sub-Saharan African countries run, and how incentives to show progress work for the people who measure this shit, I just do not believe a lot of the stats.

I think the world is in worse condition than many make out. I know India is. I’m now receiving information that China is as well (more on that at a later date, maybe).

So, shit is going to hit the fan, we are in worse shape than we think we are, we are strangling all growth rather than merely counterproductive growth, and we are lying to ourselves about the real shape of our countries and our world, and when we’re not lying about it, we’re ignoring it.

This is going to get ugly. Hundreds of millions in India. And the same in many other places.

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