Sunday, November 20, 2016

The great money experiment

Cash, an ancient form of monetary value facilitating transactions, is still dominant in most parts of the world. Initially, cash represented precious objects, an idea that forms the foundation of the gold standard, yet another archaic concept pursued by those who do not know that the world has changed. More recently, the English East India Company, that minted coins to send to the East to buy spices and borrowed the term "cash" from Sanskrit, may have been solely responsible for the adoption of cash across the empire. It is only apt that India is getting rid of "excess cash," the source of corruption, tax evasion and terrorism.

Paper money has substantially expanded monetary incompetence across the globe. If electrons can count and fly across the globe instantly to account for credits and debits, it is unclear why humans carry metal and paper in their pockets to transact. Bad habits die slow and in a world that does not barter, cash was a crutch, that is no longer needed. Those who say politicians lack vision should look East, albeit, it is a singular experiment that breaks open new possibilities. Physical forms of cash has been inefficient, archaic and problematic for centuries but none had the guts to get rid of it. To time such a catastrophe, when the eyes of the world is transfixed on the other side of the world, is pure genius.

Yes, the unexpected policy change is going to bring tactical strife to a billion people, except those who had some early warnings to move their "excess cash," to Switzerland. But it may still be utility maximizing for a country that is becoming the largest in the world with a population languishing without technology and information. The prime minister appears forward  looking but it is going to take more that a few trips to Google, Microsoft and Facebook, to prop up a country that seems to have lost its way. Sure its engineers and doctors are sought after but the soul of the country, struggling to find its place, has failed to instill confidence to propel it beyond the third world status, it has been afforded.

Getting rid of corruption and excess cash is the first step. But to go further, India has to provide technology and information to its masses in an architecture that is based on free markets and free trade and not what its socialists leaders proposed from inception.