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IPFS News Link • India

Modi's Bank Transaction Tax May Lead To Larger Conflicts

• moonofalabama.org

It now turns out that Modis extremism in not confined to the nationalist bend but includes some crazy economic ideas.

Modi decided to demonetize the country from one day to another. Every bank note valued at over US$7 was taken out of circulation. The rather crazy idea behind this is to move all monetary transactions to some electronic money systems and to then tax each and every transaction. All other kind of taxes would be abolished.

Only a lunatic without any knowledge of actual economic issues can support such a move.

The predictable result of the sudden demonetization is a liquidity crunch. There suddenly is only half the amount of money in circulation than before. Bills can not be paid, salaries are withheld, services are unused because their is no money to pay for them. The government wants to move the people to open up bank accounts but the banking infrastructure in India is rudimentary, the systems running are old and the software inadequate to handle the masses. Mobs Lock Up Bankers as Pay Day Turns Pain Day in India is a current Bloomberg headline.