Geert Lovink on Thu, 1 Dec 2016 02:43:47 +0100 (CET)

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<nettime> Telegram from Franco Berardi: Towards a Monetary Holocaust?

   Telegram from Bologna: Towards a Monetary Holocaust?

   By Franco Berardi, November 30 2016  /  Text written as a remote
   contribution to MoneyLab #3 Conference (Dec. 1/2,
   2016): <>

   In a booklet published in 2014 with the title Capitalism a ghost
   story Arundathy Roy tells some interesting stories about the evolution
   of India in the neoliberal age: "When those who had been evicted went
   back where they came from, they found their villages had disappeared
   under great dams and dusty quarries. Their homes were occupied by
   hunger and policemen. People returned to live on city streets and
   pavements, n hovels on dusty construction sites, wondering which corner
   of this huge country was meant for them... In the drive to beautify
   Delhi fro commonwealth games, laws were passed that made the poor
   vanish, like laundry stains. Street vendors disappeared, rickshaw
   pullers lost their licenses, small sops and businesses were shut down.
   Beggars were rounded up tried by mobile magistrates in mobile courts,
   and dropped outride the city limits. The slum that remained were
   screened off, with vinyl billboards that said DELHIciously yours."

   In the `90s the capitalist globalisation promised to pave the way to a
   future of prosperity for everybody, or at least for the majority of the
   world population.

   Then it became clear that the universal mobilisation of the energy of
   labor was not leading to prosperity for the majority, but only to huge
   enrichment for a small minority, a life of precarious exploitation for
   many, and marginalisation for the rest. Now globalisation is rolling
   back, stagnation is the likely prospect for the near future. So what is
   going to happen? What is the destiny of that 50% of the world
   population who have received nothing of the advantages of
   globalisation, but are now exposed to the effects of environmental
   devastation and social impoverishment that the current stagnation is
   going to provoke?

   The year 2016 has been marked by the sudden awareness that the process
   of neoliberal globalisation is failing, and is showing the emergence of
   a new alliance of neo-liberal extremism and conservative nationalism.
   The worst of two worlds that once upon a time appeared in opposition:
   anti-global reaction and simultaneously acceleration of the most
   destructive tendencies of the market.

   Norendra Modi, a hindu nationalist and a neoliberal extremist, is the
   Premier of India, a country of 1.2 billion humans. Modi, who makes part
   of this new brand of nazi market-worshippers who are winning the
   elections in many countries of the world, few days ago started an
   experiment that sounds as a turning point in the history of the world
   economy. It is called demonetisation but it may result into a great
   leap forward in the process of digitalisation of money.

   Steps towards the digitalisation of money have been taken in the last
   decades, (credit cards, digital payments...) but so far the economy of
   the countries of the world has been integrating physical money and
   online money, so allowing the survival of those people who are unable
   to deal with the digital technology. No more. The move of Modi seems to
   be intended to accelerate the pace of digitalisation in a country
   where, notwithstanding the expansion of IT technology in the last ten
   years, the digital divide still excludes a majority of the population
   from the possibility of entering the online economy. A wide part of the
   population is going to be pushed out of the economy like those poor
   people hidden by the DEHLIciously yours billboards that Arundathi Roy
   is talking about.

   Are we witnessing the first glimpses of the expulsion of half of the
   planetary population from the cycle of economic exchange? Is this the
   beginning of a sort of economic extermination? Is this the hidden
   mission of the dawning Trump-age?

   Actually the reasons that Modi has put forward to motivate his act of
   demonetisation seem quite weak: he speaks of a move against tax evasion
   and financial criminality, but in fact he is hitting hard on the
   average people, whilst tax evaders are notoriously investing their
   money abroad, and do not go around with packs of small banknotes.

   "This is like curse of God on us," said Gian Prakash Gupta, 60, a
   soft-spoken paper wholesaler "We do not know how to use computers, how
   to do online transactions, how to use card-swiping machines." The
   business of traders like Mr. Gupta, whose operations lie partly in the
   vast informal economy that makes up around 20 percent of India's gross
   domestic product and more than 80 percent of its employment, has been
   virtually paralyzed since Nov. 8, when Prime Minister Narendra Modi
   announced a surprise ban on the country's two largest currency notes,
   the 500-rupee bill (worth about $7.30) and the 1,000-rupee
   bill." (Geeta Anand, Hari Kumar: NYT 29 november 2016).

   Some of the comments in the Indian press, particularly in the
   newspapers that represent the pro-financial circles are joyful: India
   will enormously accelerate the race of growth. How so? getting rid of
   the dead weight, the majority of the population that is unable to dance
   at the rhythm, pushing them out of the economic circuit, throwing them
   down from the racing train.

   "The problem for many is they do not know how to do without cash. In
   the Chawri Bazar, generations of traders have bought and sold paper,
   from wedding cards to calendars to packing material, mostly in cash.
   Their customers paid cash, and they used it to pay their suppliers and
   workers."(Geeta Anand Hari Kumar: NYT 29 november 2016)

   From the point of view of economic history the move of Modi seems
   inexplicable. It is not the first time that demonetisation is
   experimented: in November 1923, the German government introduced a new
   currency -- the rentenmark -- and declared all old reichsmark notes to
   be no longer legal tender, as domestic prices, already 14 times their
   1913 levels in mid-1921 and 1,475 times towards end-1922, had
   skyrocketed to 1,422,900,000,000 times by November next year.

   As the currency lost value by the minute, people rushed to spend their
   wages the very moment they received them, fuelling further inflation.
   The only way to deal with this situation was demonetisation: purging
   the system of all existing notes and launching a new currency backed by
   solid assets -- in this case, land belonging to the state. With
   credibility restored, inflation fell and the run on the currency, too,

   On January 1, 1998 Boris Yeltsin changed the name of Russian currency,
   with a `new' rouble being made equal to 1,000 `old' roubles. with the
   intention of addressing rampant inflation. But the `new' rouble's
   exchange rate, which was 5.96 to the dollar on January 1, collapsed to
   20.65 when the year ended, with consumer price inflation also soaring
   to 84.5%.

   The Narendra Modi demonetisation of Rs 500 and Rs 1,000
   banknotes -- constituting over 86% of the total value of currency in
   circulation -- hasn't been undertaken in response to any hyperinflation
   or loss of confidence in the rupee. The rupee has actually been quite
   strong and annual consumer price inflation was just 4.2% in October.
   That implies that the Modi demonetisation does not follow the
   conventional logic of a currency `stabilisation' measure, but is
   a `structural reform', targeted at fostering cashless economy.

   The present demonetisation triggers spurt in digital payments paving
   the way for India towards cashless economy.

   The demonetisation which initially paralysed the economy is now acting
   as a catalyst towards digital payment ecosystem. This seems to be the
   beginning of an economic transition. Indian newspapers relate that
   payment processing companies are overloaded and are racing the devil to
   accommodate the immense spike in traffic. But in India, most economic
   transactions take place in cash outside recorded market channels and
   hence go largely untaxed. This is fostering a parallel `black' economy
   but this allows the majority of Indian population to survive. The
   brutal transformation of the currency system has already provoked
   panic, and casualties, but in the long run it may pave the way to a
   radical redrawing of the monetary field in the direction of radical
   digitalisation, and consequently to the expulsion of a majority of
   society. The digital divide may be turned into a tool for the
   elimination of the "non competitive" section of the human kind. Modi
   came to the fore fifteen years ago as responsible of the assassination
   of more than thousand Muslims in the city of Ayodhya. Now his projects
   are more ambitious, and he seems aimed to become the vanguard of a
   possible monetary Holocaust.

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