Gold closed at $1223.60 DOWN $0.60
silver closed at $16.92: DOWN $0.11
Access market prices:
THE DAILY GOLD FIX REPORT FROM SHANGHAI AND LONDON
The Shanghai fix is at 10:15 pm est and 2:15 am est
The fix for London is at 5:30 am est (first fix) and 10 am est (second fix)
Thus Shanghai’s second fix corresponds to 195 minutes before London’s first fix.
And now the fix recordings:
Shanghai morning fix Nov 16 (10:15 pm est last night): $ 1240.41
NY ACCESS PRICE: $1231.65 (AT THE EXACT SAME TIME)/premium$8.76
Shanghai afternoon fix: 2: 15 am est (second fix/early morning):$ 1241.65
NY ACCESS PRICE: 1229.65 (AT THE EXACT SAME TIME/2:15 am)
HUGE SPREAD 2ND FIX TODAY!! 12.00 dollars
London Fix: Nov 16: 5:30 am est: $1225.70 (NY: same time: $1226.40 5:30AM)???
London Second fix Nov 16: 10 am est: $1229.20 (NY same time: $1227.30, 10 AM)???
It seems that Shanghai pricing is higher than the other two , (NY and London). The spread has been occurring on a regular basis and thus I expect to see arbitrage happening as investors buy the lower priced NY gold and sell to China at the higher price. This should drain the comex.
Also why would mining companies hand in their gold to the comex and receive constantly lower prices. They would be open to lawsuits if they knowingly continue to supply the comex despite the fact that they could be receiving higher prices in Shanghai.
For comex gold:
NOTICES FILINGS FOR NOVEMBER CONTRACT MONTH: 5 NOTICES FOR 500 OZ TONNES
NOTICES FOR NOVEMBER CONTRACT MONTH FOR SILVER: 1 NOTICE OR 5,000 OZ
Let us have a look at the data for today
In silver, the total open interest FELL by 1388 contracts DOWN to 174,831 with yesterday’s trading. In ounces, the OI is still represented by just less THAN 1 BILLION oz i.e. .874 BILLION TO BE EXACT or 124% of annual global silver production (ex Russia & ex China).
In November, in silver, 1 notice(s) filings: FOR 5,000 OZ
In gold, the total comex gold FELL by 9,537 contracts DESPITE THE RISE IN THE PRICE OF GOLD ($2.80 yesterday ).The total gold OI stands at 479,237 contracts.
In gold: we had 5 notices filed for 500 oz
With respect to our two criminal funds, the GLD and the SLV:
a big change in the gold inventory at the GLD/another withdrawal of 1.19 tonnes
Inventory rests tonight: 926.26 tonnes
we had a small withdrawal at the SLV equal to 474,000 oz.
THE SLV Inventory rests at: 356.253million oz
First, here is an outline of what will be discussed tonight:
1. Today, we had the open interest in silver FELL by 1388 contracts DOWN to 174,831 despite the fact that the price of silver ROSE by $0.15 with YESTERDAY’S trading. The gold open interest FELL by 9537 contracts DOWN to 479,237 as the price of gold ROSE BY $2.80 in YESTERDAY’S TRADING.
2.a) The Shanghai and London gold fix report
2 b) Gold/silver trading overnight Europe, Goldcore
and in NY: Bloomberg
3. ASIAN AFFAIRS
i)Late TUESDAY night/WEDNESDAY morning: Shanghai closed DOWN 1.93 POINTS OR 0.06%/ /Hang Sang closed DOWN 43.38 OR 0.19%. The Nikkei closed UP 194.06 points or 1.10%/Australia’s all ordinaires CLOSED DOWN 0.02% /Chinese yuan (ONSHORE) closed DOWN at 6.8790/Oil FELL to 45.23 dollars per barrel for WTI and 46.39 for Brent. Stocks in Europe: ALL IN THE RED Offshore yuan trades 6.8937 yuan to the dollar vs 6.8790 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS CONSIDERABLY AS MORE USA DOLLARS LEAVE CHINA’S SHORES / CHINA SENDS A CLEAR MESSAGE TO THE USA AND JANET TO NOT RAISE RATES IN DECEMBER.
REPORT ON JAPAN SOUTH KOREA NORTH KOREA AND CHINA
b) REPORT ON JAPAN
All eyes will be on Japan as the 10 year yield on Japanese bonds climbs above zero for the 2nd day in a row. Eight weeks ago when Japan’s new policy was unleashed, Japan was threatening to taper its purchases to keep the rate near zero. Now as bond prices fall badly (yields rise) will Japan abandon their new policy. With Trump read to supply fiscal stimulus will the world see helicopter money throughout the globe?
(courtesy zero hedge)
c) REPORT ON CHINA
Yuan falters again and lands into the 6.87 barrier for onshore and 6.89 for offshore
( zero hedge)
4 EUROPEAN AFFAIRS
Obama faces violent clashes in Greece as demonstrators are protesting his visit
5. RUSSIAN AND MIDDLE EASTERN AFFAIRS
CHINA/SAUDI ARABIA/USA TREASURIES
Late in the session: a must read..
This is huge: both Saudi and China are dumping massive quantities of USA treasuries. In September a total of $76 billion were sold. Up until last month only private investors were buying the stuff and they seemed to have gorged on the stuff. And now yields are rising!! And Trump is going on a fiscal spending spree of which the Fed cannot monetize?
Janet may not raise rates in December.
(courtesy zero hedge)
i)Another spurious OPEC headline as oil rebounds into the 46 dollar handle despite huge inventory builds
( zero hedge)
ii)So much for the rise in oil today: Iraq, Iran and Nigeria’s oil ministers all decided to skip that important OPEC meeting in DOHA
i)Quite a story: after paying $3,500.00 for the Fort Knox audits, two months ago, Koos Jansen still does not have the papers. he outlines to us his troubles in getting those documents.
( Koos Jansen Bullionstar)
ii)A very important paper from Craig Hemke on the Chinese yuan. The lower the yuan value will be a huge benefit for us in the price of gold and silver.
( Craig Hemke/TFMetals report)
iii)A must read two parter. James Turk states that Trump will want sound money (and he has picked two biggies in that dept (Judy Shelton, and David Malpass). Maybe Trump will rescind Nixon’s convertibility into gold and then the USA will revalue gold to say 10,000 dollars per oz. Then gold will flow back into the uSA and spending can once again continue
( James Turk/Kingworld news/2 parts)
i)Interesting: producer prices remain at zero and disappoints. The real stumbling block was asset management fees which tumbled 5.7% as well as food deflation taking a grip in the USA. In a nutshell goods higher, and services lower.
( zero hedge)
ii)Industrial production continues to contract in the USA. We have now had 14 consecutive months showing contraction;
( Industrial Production/zero hedge)
iii)Not good: Boeing shuttering two plants after United delays 5 billion dollars worth of 737 orders:
Let us head over to the comex:
The total gold comex open interest FELL by 9,537 CONTRACTS to an OI level of 479,237 DESPITE THE FACT THAT GOLD ROSE $2.80 with YESTERDAY’S trading. In the front month of November we had 29 notices standing for a LOSS of 49 contracts. We had 51 notices served on yesterday so we GAINED 2 contracts or 200 ADDITIONAL oz will stand for delivery in November. The next contract month and the biggest of the year is December and here this month showed a decrease of 11,594 contracts down to 237,109. The December contract month is still highly elevated compared to a year ago. On Tuesday Nov 17/2015 comex reading day, we had a total of 194,026 contracts standing ( a gain of 2,483 contracts from Nov 16/2015) It certainly emphasizes the huge demand for physical gold. THIS SHOULD EXPLAIN TO YOU WHY THE BANKERS ARE CONSTANTLY WHACKING OF GOLD (AND SILVER): THE HIGH OI FOR DECEMBER AND THE HIGH PROBABILITY THAT MANY WILL TAKE DELIVERY.
And now for the wild silver comex results. Total silver OI FELL by 1388 contracts from 176,219 DOWN TO 174,831 as the price of silver ROSE BY $0.15 with yesterday’s trading. We are moving further from the all time record high for silver open interest set on Wednesday August 3/2016: (224,540). The front month of November had an OI of 1 and thus a loss of 111 contracts. We had 112 notices filed yesterday so we gained 1 contract or an additional 5,000 oz will stand for delivery in this non active month of November. The next major delivery month is December and here it FELL BY 2,263 contracts DOWN to 86,293. The December contract month is also highly elevated compared to a year ago. On Nov 17/2015 reporting day, we had a level of 71,593 contracts having gained 1278 contracts on the day).
In silver had 1 notice filed for 5,000 oz
Eventually at the end of December 2015: 6.4512 tonnes of gold stood for delivery
Eventually at the end of December 2015: 18.84 million oz of silver stood for delivery.
VOLUMES: for the gold comex
Today the estimated volume was 219.101 contracts which is good.
Friday’s confirmed volume was 259,975 contracts which is very good
|Withdrawals from Dealers Inventory in oz||NIL|
|Withdrawals from Customer Inventory in oz nil||
INCLUDES 5000 KILOBAR REMOVAL JPM
|Deposits to the Dealer Inventory in oz||nil oz|
|Deposits to the Customer Inventory, in oz||
|No of oz served (contracts) today||
|No of oz to be served (notices)||
|Total monthly oz gold served (contracts) so far this month||
|Total accumulative withdrawals of gold from the Dealers inventory this month||nil oz|
|Total accumulative withdrawal of gold from the Customer inventory this month||549,896.2 oz|
Today, 0 notices were issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 5 contracts of which 0 notices were stopped (received) by jPMorgan dealer and 0 notice(s) was (were) stopped/ Received) by jPMorgan customer account.
March 2015: 2.311 tonnes (March is a non delivery month)
|Withdrawals from Dealers Inventory||NIL|
|Withdrawals from Customer Inventory||
|Deposits to the Dealer Inventory||
|Deposits to the Customer Inventory||
|No of oz served today (contracts)||
|No of oz to be served (notices)||
|Total monthly oz silver served (contracts)||465 contracts (2,325,000 oz)|
|Total accumulative withdrawal of silver from the Dealers inventory this month||NIL oz|
|Total accumulative withdrawal of silver from the Customer inventory this month||5,415,036.2 oz|
NPV for Sprott and Central Fund of Canada
Major gold/silver stories for WEDNESDAY
Early morning gold/silver trading/Goldcore
Peak Gold Globally – “Bullish For Gold”
Gold mine production is peaking globally and this is “bullish for gold” according to a slowly emerging group in the gold industry. It is great to see the reality of peak gold production slowly be acknowledged in the mainstream as it is an important fundamental factor in the market which has been continuously ignored.
As reported by Bloomberg in ‘Decade of Gold Mine Declines Poised to Spur Deals, Prices’ today:
Gold’s dwindling pipeline of new mines is poised to usher in a decade-long output slump, spurring prices and delivering a new impetus for dealmaking and industry consolidation, according to Goldcorp Inc., the third-largest gold producer.
Mine supply may fall about a third in the 10 years to 2025, according to Bloomberg calculations based on forecasts from BMO Capital Markets and Randgold Resources Ltd. The number of newly discovered primary gold deposits fell to three in 2014, from a peak of 37 in 1987, according to Melbourne-based industry adviser MinEx Consulting Pty.
Gold production may peak in the next three years as miners fail to replace their reserves, Randgold’s Chief Executive Officer Mark Bristow said in September. And, according to Goldcorp’s Telfer, producers have limited scope to raise output in response to higher prices. “We are having a heck of a time finding gold,” he said.
The metal is up 16 percent this year, rebounding from three straight annual declines. Gold may average $1,500 an ounce by 2020, according to an August note from BMI Research.
“Once supply from mines starts to decline and people start to realize the impact that’s going to have, I think it’s going to be incredibly bullish for gold,” Telfer said in the interview last week in Melbourne. “If gold went to $2,500 an ounce tomorrow, Goldcorp’s production wouldn’t change for the next four years. It can’t react to a change.”
‘Peak Gold’ is happening which has important ramifications for gold prices and is why we were one of the first analysts in the industry to consider the peak gold phenomenon back in 2007 and 2008. Even Goldman Sachs now acknowledges the importance of peak gold to the gold market. It is another long term positive fundamental for the market and will support prices and could contribute to much higher prices in the coming volatile and uncertain years.
Gold and Silver Bullion – News and Commentary
Gold Prices (LBMA AM)
16 Nov: USD 1,225.70, GBP 9,984.36 & EUR 1,144.68 per ounce
15 Nov: USD 1,228.90, GBP 998.86 & EUR 1,138.70 per ounce
14 Nov: USD 1,222.60, GBP 997.80 & EUR 1,136.53 per ounce
11 Nov: USD 1,255.65, GBP 999.19 & EUR 1,154.45 per ounce
10 Nov: USD 1,280.90, GBP 1,034.07 & EUR 1,175.48 per ounce
09 Nov: USD 1,304.55, GBP 1,050.42 & EUR 1,176.84 per ounce
08 Nov: USD 1,284.00, GBP 1,034.26 & EUR 1,162.02 per ounce
Silver Prices (LBMA)
16 Nov: USD 16.95, GBP 13.64 & EUR 15.85 per ounce
15 Nov: USD 17.00, GBP 13.68 & EUR 15.80 per ounce
14 Nov: USD 17.20, GBP 13.73 & EUR 15.95 per ounce
11 Nov: USD 18.59, GBP 14.73 & EUR 17.09 per ounce
10 Nov: USD 18.75, GBP 15.11 & EUR 17.20 per ounce
09 Nov: USD 18.81, GBP 15.12 & EUR 16.96 per ounce
08 Nov: USD 18.26, GBP 14.72 & EUR 16.54 per ounce
Recent Market Updates
– Gold Price Should Go Higher On Global Risks and Trump – Capital Economics
– President Trump – Why Market Loves Him and Experts Wrong
– ‘Helicopter Money President’ Trump To Create Inflation and Gold Will Rise
– Central Bank Gold Demand continues in Q3
– Trump Victory Sends Gold Surging 5%
– An uncertain election outcome looks good for gold
– Ignore past elections, this one’s too uncertain
– Gold may be the only winner in US elections
– The London Gold Market – ripe for take-over by China?
– Diwali, Gold and India – Is Love Affair Over?
– Silver Krugerrands By South African Mint Coming Soon – Massive Clearance Sale on Gold Krugerrands
– Trump “Will Probably Win” and Gold “May Rise $100” Overnight – Rickards
– World Is Out of Weapons
Quite a story: after paying $3,500.00 for the Fort Knox audits, two months ago, Koos Jansen still does not have the papers. he outlines to us his troubles in getting those documents.
(courtesy Koos Jansen Bullionstar)
Koos Jansen: We paid for a copy of the Fort Knox audit report, so where is it?
Submitted by cpowell on Tue, 2016-11-15 16:12. Section: Daily Dispatches
11:15a ET Tuesday, November 15, 2016
Dear Friend of GATA and Gold:
Gold researcher Koos Jansen reports today how the U.S. Mint has failed to produce a copy of a gold audit report for which he paid more than $3,100 back in September. Why, in the digital age, anyone should have to pay that kind of money for a government report is hard to understand — unless, of course, the report contains information whose disclosure might be inconvenient to the U.S. government’s longstanding policy of gold price suppression. Jansen’s report is headlined “Dear US Mint, We Gave You the FOIA Funds, Now Give Us the Fort Knox Audit Documents” and it’s posted at Bullion Star here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
A very important paper from Craig Hemke on the Chinese yuan. The lower the yuan value will be a huge benefit for us in the price of gold and silver.
(courtesy Craig Hemke/TFMetals report)
Watching The Yuan
The recent surge in the US dollar has again brought massive selling in the emerging market currencies, most notably the Chinese yuan. This has occurred twice before in the past 15 months and each prior instance has foreshadowed a 10% drop in the S&P 500. Therefore, are we on the verge of another stock market correction?
We’ve been alluding to this in the podcasts of late and I’ve been meaning to write about it with some illustrative charts. However, the metals have been so volatile that I haven’t had the opportunity. Today, with both gold and silver mostly flat on the session, I thought I’d seize the moment.
The problem for the Chinese is that the yuan is pegged to the US dollar. So, when the dollar strengthens…as it has for the past 60 days or so…the yuan strengthens, as well. The PBoC doesn’t like this very much as it makes their exports more “expensive”. It also creates a whole host of other issues, many of which are summed up in this excellent article I found at ZH last evening:
So, anyway, it’s the ripple effect of the Chinese yuan devaluation that has my interest. First of all, here’s a chart USDCNY chart that covers the last five years. Just like when the Japanese yen is portrayed by the USDJPY, a rising USDCNY means that the yuan is getting weaker versus the US dollar. Note that, even with the “peg” in place, the yuan has weakened by over 10% in the past three years.
Now let’s drill in a little closer so that you can see where we’re headed with this. On this weekly chart of the USDCNY, you can see four, specific periods of PBoC action to weaken the yuan in response to a surging dollar.
- A 3% devaluation in week of August 9, 2015
- A 3% devaluation between late November 2015 and early January 2016
- A 2% devaluation in June of 2016
- This current 2.7% devaluation that began the week of October 9
OK, so this is where it gets interesting. Check this weekly chart of the S&P 500. Be sure to note:
- the 10% decline in mid-late August of 2015
- the 10% drop in early January of this year
- the 5% drop in June of this year
As you can see, there is a distinct, lagging correlation between devaluations in the yuan and corrections in the S&P. Perhaps, since the S&P was falling sharply before the US election, this yuan-related correction has already occurred? Perhaps the huge rally in stocks over the past five days will preclude any further decline? Perhaps.
However, if history is any guide, a soaring US dollar seems to put extreme stress on China and all emerging market currencies. In the past, this has led to liquidity shortages which have eventually bled into the US stock market. And the PBoC doesn’t appear to be finished with this latest round of yuan devaluation. Below are the changes over just the past few days and check this new “warning” about all of this from the BIS: http://www.zerohedge.com/news/2016-11-15/vix-dead-according-bis-new-fear-indicator
Finally, as this site is dedicated to the precious metals and gold is often well-bid as a “safe haven” during periods of stock market selloffs, check this one last chart. Be sure to note the timing of the surges in the paper derivative gold price and note how they neatly coincide with the weakening yuan and falling equity markets.
With stock market bullishness at extreme levels and the gold permabears out in force, a sharp rally in gold from here would certainly catch almost everyone by surprise. So, could a rally be coming on the days ahead? Perhaps you should just keep your eyes focused upon the yuan. It may once again be foreshadowing what is to come next.
Just something to consider on what is otherwise an uneventful Tuesday.
A must read two parter. James Turk states that Trump will want sound money (and he has picked two biggies in that dept (Judy Shelton, and David Malpass). Maybe Trump will rescind Nixon’s convertibility into gold and then the USA will revalue gold to say 10,000 dollars per oz. Then gold will flow back into the uSA and spending can once again continue
(courtesy James Turk/Kingworld news/2 parts)
Trump’s deficits will wreck dollar without a gold standard, Turk tells KWN
Submitted by cpowell on Tue, 2016-11-15 18:01. Section: Daily Dispatches
1:04p ET Tuesday, November 15, 2016
Dear Friend of GATA and Gold:
In a two-part interview with King World News, GoldMoney founder and GATA consultant James Turk predicts that a Trump administration in the United States will be forced into running more big deficits financed by money printing and that this will damage the dollar but that returning to a gold standard with a much higher gold price would restore prosperity and stability. The interview’s two parts can be found at King World News here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Meanwhile in India, panic as gold skyrockets in India after its currency ban
Scenes Of Panic As Gold Price Skyrockets In India After Currency Ban
Chaos in the Wake of the Ban
Here is a link to Part 1, about what happened in the first two days after India’s government made Rs 500 (~$7.50) and Rs 1,000 (~$15) banknotes illegal. They can now only be converted to Rs 100 (~$1.50) or lower denomination notes, at bank branches or post offices. Banks were closed the first day after the decision. What follows is the crux of what has happened over the subsequent four days.
India’s prime minister Nahendra Modi, author of the recent overnight currency ban
Today India is on the verge of a major social-political crisis, unless either the government backs off from the decision of banning the currency or some real magic happens. There is chaos in the streets and daily life is slowly but surely coming to a full halt.
What Modi did was not only heavy-handed, hugely arrogant, and of no value, it has been very badly implemented to boot — as everything in India always is — and carries the real potential of escalating and snowballing into something horrific. They could have seen that this was not going to end well by simply using primary school math.
Modi, Nationalism, and the Public School-Indoctrinated Middle Class
India today is like a cult under the influence of Narendra Modi — in which unlike in the past, not the poorest or uneducated citizens, but mostly members of the so-called educated middle class participate. Over the last two decades, people have been exposed to mass education, TV and nationalistic propaganda without being taught an iota of critical thinking skills.
In a society in which the concept of reason does not exist, this has made these people receptive to any kind of propaganda with a nationalistic or Hindutva bent. (Hindutva = fanatical Hinduism, which is rapidly metastasizing).
To aggrandize his position, Modi ordered a lot of military-hardware that India cannot afford, escalated tensions with Pakistan, and conducted what was very likely a fake surgical strike inside Pakistan. This united Indians under the flag.
Now, the demonetization of the Rs 500 and Rs 1000 banknotes was tagged with nationalism, anti-corruption, and anti-terrorism. Simple-minded, slogan-susceptible persons were hardwired to accept an erroneous causality. Those who did not go along were made to be afraid of being called pro-terrorist elements.
Those in the middle class have taken what they deem to be the higher moral ground, for they have mostly avoided suffering from the demonetization. Lacking moral instincts — which is unfortunately the case with much of Indian society, given its deep-rooted irrationality and superstitions — they cannot see or feel the pain of those who are suffering, even if that suffering stares into their faces.
But events are in motion that will likely very soon lead to these salaried members of the middle class starting to feel the pain as well. Their instinctive trust in Modi is likely within weeks of coming crashing down, not because of reasoned argument, but because they will be facing similar problems as the ones the common man is now facing.
Conversion to the New Currency
I went to convert my banned banknotes into new ones. The largest amount one can have converted is Rs 4,000 ($60), until further notice. There was a huge rush of people at the bank. Arguments were erupting, as people refused to stand in queues and the banks gave no explanation of what needed to be done. Fights were breaking out.
Amid the chaos I finally learned that there were three queues I had to go through in a sequence. I had to get a form from one counter, which I had to fill in with my name and address, my ID card details, the serial numbers of all the bills I wanted to exchange, and my cell-phone number.
At the second counter, I then had to present the completed form along with a photocopy of my ID card. I had to sign on the photocopy which an official then stamped. With my banknotes, the form and the photocopy of my ID card, I then went to the next queue to get my currency converted at a third counter. The whole process took about two hours. For most people in the busier parts of the cities, it took much longer.
Day 1 of the banks opening. Poor, desperate people, whom the government treats like slaves or perhaps insects. Somehow these people have been brainwashed into thinking they live in a free country. My granddad kept photographs of British royalty on the walls of his office until his final days, for he had realized that the British had treated him much better.
Anyone who thinks that a country which wastes two hours of every citizen’s life to convert his own $60 can ever hope to be an economic power is drinking too much Kool-Aid and cannot do primary level math. Forget any possibility of removing unaccounted for money or reducing corruption, what Modi is doing is a recipe for the destruction of whatever legitimate economy there is.
That same afternoon, I went to the post office with a friend who wanted to get his money converted. After waiting a long time there, we found out that the post office had run out of cash. Since then most ATMs have had limited amounts of cash available and banks keep running out of cash as well.
The queues have continued to grow. People start lining up late into the night waiting for banks to open and still have to go back home with no cash. What started with two hours of queuing is becoming an endless slog now.
An endless queue to convert Rs 4,000 (USD 60). Will they actually go home with their new cash?
The Problems Go Much Deeper
Half of India’s citizens do not have a bank account and around 25% do not even have an ID card. These are the country’s poorest people, who have no way of converting their money – even if they learn how to do it, which is already a nigh insurmountable hurdle. Also, those who are old, disabled or sick have no choice but to suffer, for without personally visiting a bank branch office, one cannot convert one’s banknotes.
An old disabled woman struggling to get her money converted. One has to be utterly heartless not to feel angry about the situation.
97% of the Indian economy is cash-based. With 88% of all outstanding currency no longer usable, the economy is coming to a standstill. The daily-wage laborer, who leads a hand-to-mouth existence in a country with GDP per capita of a mere $1,600, no longer has work, as his employer has no cash to pay his wages. His life is in utter chaos. He is not as smart as Modi — despite the fact that Modi has no real life experience except as a bully and perhaps in his early days as a tea-seller at a train-station. He has no clue where his life is headed from here.
These people are going hungry, and some have begun to raid food shops. People are dying for lack of treatment at hospitals. Old people are dying in the endless queues. Some are killing themselves, as they are unable to comprehend the situation and simply don’t know what to do. There are now hundreds of such stories in the media.
Small businesses are in shambles, and many will probably never recover. The Hindu wedding season has just started and people are left with unusable banknotes. Their personal and family lives are now an utter disaster.
Desperate people raiding a supermarket
Lacking moral and rational anchors, and hence compassion, members of the salaried middle class are unperturbed. Their salaries get taxed and most of the bribes they are getting end up in gold or property investments. In their minds, poor people and small businesses don’t matter. In the hypocritical culture of India, as long as the middle class is not suffering — for the time being — they prefer to take what they believe to be the higher moral ground.
Why This Problem Will Get Much Worse
Let us do a few simple numbers… What has been made illegal comprises 88% of the monetary value of all currency notes in circulation. In an economy based primarily on cash, the liquidity of cash is the lifeline of the economy. This requires that 88% of the new currency be rapidly dispersed into the market.
The Indian government has absolutely no history of being able to entertain a project of this type or magnitude ever and after the British left, India’s institutions have continued to deteriorate, so hope is not an option. If they fail to issue enough new bills, the very limited supply of Rs 100 notes will disappear within a few days.
As any rational person has a tendency to store good money while using bad money in transactions, people will hide all newly released currency as well as Rs 100 banknotes until full liquidity is restored. The rich and the well-connected have already done what was needed.
A reminder of Gresham’s law for Modi: “Bad money drives out good money.”
Those who have no need to convert their money as all their cash is already in the banking system (as is the case with the salaried middle class), which they think is making them look like a heroes in the eyes of Modi and is giving them a sense of moral superiority – they are nothing but turkeys being groomed.
Banks are giving out a mere Rs 20,000 ($300) a week at best. Their lives will suffer and for all intents and purposes, their accounts are frozen. This is Cyprus ten times over – they just haven’t realized it yet.
Whichever way one looks at the above numbers, India’s economy is going to start suffocating, within weeks, if not within days. And a serious political and social crisis will take place, which will eventually acquire a life of its own. That is when the as of yet unperturbed salaried middle class wakes up with pain.
As in any irrational system, it is not reason and morality that will have convinced them to scuttle their hypocrisy and limited vision, but the violence and pain that they themselves will suffer.
Politicians and bureaucrats of course cannot be seen queuing at the banks. Many bank branches apparently had their cash secretly replaced by the now-illegal bills before the first day of reopening. While no more than two bills of Rs 2000 each should have been collected, those better connected apparently haven’t had a problem with this and have been shown showing off packets of the new currency they have. All this cash will do nothing but end up under mattresses, as it has in the past.