On November 8, 2016, the Indian government announced the withdrawal of its two highest denomination currency notes.  The 500-rupee and the 1,000-rupee (about $7.35 and $14.70) were instantly banned with no notice.

People supposedly have until the end of the year to trade in their old currency for new currency being issued.  This has caused long lines at banks and many headaches to go along with it.

The corrupt prime minister (Modi) and the corrupt Indian government essentially banned over 86% of the currency in circulation in India.  In the name of cracking down on corruption and black market activity, the government has quickly destroyed what little economy there is in India.  Like most government programs, it is hurting the innocent people more than the guilty, if you can even call anyone guilty.

If anyone is guilty, it is the corrupt government and those who support it.  Every national government on the planet is corrupt, but some more than others.  Considering the corruptness and bureaucracy of the U.S. government, the Indian government is probably ten times worse.

There are certainly some who are speculating about something similar happening in the U.S.  What are the chances that the government and/ or Federal Reserve would pull something similar in the United States?

My guess is that there is very little chance of this happening in the U.S. anytime soon.

First, the U.S. dollar is still the world’s reserve currency, even if it has slipped a little.  The dollar is in high demand, so the Fed would not ruin this by playing these types of games.  In fact, the Indians would be wise to use the U.S. dollar as a form of currency instead of the even worse piece of junk issued by their own central bank.

Second, the U.S. government does not have as much need to crack down on black markets.  They certainly exist in the U.S., but the big money is digital in the banking system.  U.S. currency is mostly used for small transactions and for immigrants to send to relatives in their home countries.  The U.S. government already has widespread compliance with taxation.

Third, I don’t think it is politically possible to do something similar.  If the Fed were to ban 20-dollar bills and above, you might see lineups at the banks similar to what is now seen in India.  But you would see even bigger lines in Washington DC and the Congressional offices.  The people may or may not carry pitchforks.

I understand that Nixon closed what remained of the gold standard in 1971.  But this did not have an immediate impact on most Americans.  They could just continue to use their money at the store as they did before.  It was damaging long-term because it meant virtually all limits had been removed from the central bank’s ability to inflate the money supply.

If something happened in the U.S. similar to what just happened in India, there really would be a revolt.  Americans don’t like to be told what to do.  That is why Trump won the election.  There are still a lot of rebels out there.

The U.S. economy is enormous compared to India’s.  U.S. workers don’t have hours to stand around at a bank waiting to exchange their currency.  They really would revolt with such a measure.  You would quickly see the responsible parties held accountable, which could include impeachment.

While Americans have certainly enslaved themselves, it is to a much lesser degree than much of the world.  The culture in India is different.  The people enslave themselves to a great degree.  They consent to their corrupt government and all of its actions.  They just sit there and take it.  I don’t understand the mentality, but it is a different culture.

The Indian people do have a penchant for gold.  That is one positive thing I see with the culture.  It shows a hint of distrust for the government.  But overall, they act as serfs.  The more creative and free thinking people leave the country.  They go to the U.S.

Anything is possible in the future.  The U.S. economy could get hammered, and we could see desperate measures.  When things aren’t going well, many people become more accepting of things they wouldn’t have accepted before.  Still, I think we are a ways off from having anything similar happen in the U.S.

Meanwhile, the Indian economy will be an even bigger basket case than it was before.  It will mean even more poverty, if that is possible.  The Indian people will likely increase their demand for gold and for U.S. dollars, since their currency can’t be trusted at all any longer.

The higher demand for dollars is bad for U.S. gold investors.  The higher demand for gold is good for gold investors.  Overall, the Indian people are so poor that it may not have that great of an impact either way.  It is sad to see for them though.