2ndlook

70 years later, RBI remains true to its DNA

Posted in Business, Current Affairs, Environment, European History, Gold Reserves, History, Media by Anuraag Sanghi on January 22, 2009
An bankrupt West is a bad economic model to follow. RBI in the last 3-5 years has shown some independence in policy matters - finally. (Cartoon courtesy - bhra.files.wordpress.com). Click for larger image.

An bankrupt West is a bad economic model to follow. RBI in the last 3-5 years has shown some independence in policy matters - finally. (Cartoon courtesy - bhra.files.wordpress.com). Click for larger image.

there is a curious aspect to the Indian economic System (defined as commentators, policy makers, and academicians). The System systematically thinks in a skewed fashion, and unlike any other System in the world. In particular, it is trigger happy to bring the economy to a screeching halt by raising interest rates, but asleep at the wheel when the economy is in desperate shape — e.g. confidence at historic lows, industrial growth at zero, and exports diving over a cliff. (via Surjit Bhalla: Lazy banking at its finest).

It is not so curious Mr.Bhalla. You only have to look at the history of RBI formation and its objective. Fact is RBI has not outgrown its colonial DNA.

April Fool Joke – The RBI

On April 1st, 1934, while the ‘Squeeze India’ campaign was under execution – and being choreographed by Montagu Norman, Neville Chamberlain, Winston Churchill and Lord Willingdon, RBI, India’s banking authority was set up. From that April Fool’s day till now, RBI character has not changed. It remains isolated, out of touch with the India – and looks at India through colonial viewing glasses.

First things, first …

RBI and the Colonial India Government initiated many reports on the ‘condition’ of the Indian economy. Based on these reports, they passed many of the laws restricting money lending activities. These reports - Central Banking Enquiry Committee (CBEC) report (1929) and its associated Provincial Banking Enquiry Committee reports (of Assam, Bombay, Burma, Ceylon, Central Provinces, Bengal, Punjab, et al) of which the Madras Provincial Banking Enquiry Committee (MPBEC) report is cited by lazy academics and out-moded bureaucratsas authoritative – even in post-colonial era.

Western economies have been hiding their economic stagnation for the last 10 years by handing out loans to voters, industry and banks. For how long can this system work? Cartoon by Michael Ramirez. Click for larger image.

Western economies have been hiding their economic stagnation for the last 10 years by handing out loans to voters, industry and banks. For how long can this system work? Cartoon by Michael Ramirez. Click for larger image.

Based on these reports co-ordinated by the RBI, Debt Conciliation Acts were passed between 1933 and 1936 by the governments of Assam, Bengal, Central Provinces and Berar, Madras and Punjab; the Punjab Regulation of Accounts Act (1930) and the Debtors Protection Acts of 1935 and other such burdensome laws buried the money lender in mountains of paperwork and licenses. These laws required money lenders to comply with extensive and prolonged compulsory licensing and registration – and extensive recording of transactions and accounts.

What these laws achieved was what was desired – a license for police and other ‘inspectors’ to start an extortion racket from money lenders (these days called corruption). A bureaucrat from colonial Punjab, Malcolm Darling (1925) shedding crocodile tears stated “the Indian peasant is born in debt, lives in debt and dies in debt” became a by line for tarring the money lender – while the cause was extractive, colonial revenue practices.

Options foreclosed

While the world was reeling under a crisis of the Great Depression, these restrictions on money lending foreclosed the liquidity option for the Indian peasant, which would have averted the gold outflow from India and the impoverishment of the Indian peasant. With this legalized persecution, money lenders’ activities were curtailed all over India.

RBI joined in this hounding of the money lenders – which continues to this day. The Bengal Burma link of the ages was broken. Chettiar money lenders were thrown out of Burma. From being a granary of Asia, Burma started declining – and there was no rice for exports. Result – The Bengal Famine of 1943. Tally – 40-50 lakh deaths. Similarly, the role of Chettiars in Singapore was wiped clean.

Subhash Chandra Bose's diplomatic initiatives left the British War efforts nervous and anxious. (Image sources - hindustantimes.com). Click for source image.

Subhash Chandra Bose's diplomatic initiatives left the British War efforts nervous and anxious. (Image sources - hindustantimes.com). Click for source image.

After the fall of Singapore, and the rapid Japanese advance, with Subhash Chandra Bose in the vicinity, a revolt by Bengal would have had catastrophic effect on the colonial administration. Howard Fast, in his novel ‘The Pledge’ believes that the Bengal Famine was deliberate creation – possibly to weaken the local population.

Elephants in the room

Firstly, the answer to your curiosity cannot come from the West. And since, the Indian English press (especially), depends on the West for cues, they miss out some vital elements. For instance, how the Indian economy was used to meet Britain’s Post WW1 liabilities. To ‘dampen’ gold demand for India, the Indian rupee was put on fixed overvalued rate vis-a-vis the sterling.

Indian exports crashed, imports ballooned. Indian accounts would be settled at ‘official’ silver prices, with inflated silver released by the US under the Pittman Act. Gold prices were deflated – and Indians would therefore have to pay more in gold. Thus with with a combination of inflated silver price, deflated gold price, high interest rates and an overvalued Indian rupee, the Indian economy was strangled. Few Western writers or books identify this - unwittingly, or deliberately.

RBI was a pawn in this game – and it remains true to its DNA.

India funded the post WW1 recovery

The mechanics and the development of this plan are laid out in a better book, John Bullion’s Empire by By G. Balachandran. This book traces how much of India’s poverty was a result of economic policies between the two World Wars co-ordinated by these four central bankers.

On October 27th, 1931, the Ramsey Macdonald led “National” Government (Conservatives and Liberals coalition, fearful of the rising Labour Party) in Britain won a huge majority of 554 MPs of 615. The economic crisis of September 1931 (misnamed as the Indian Currency Crisis) was a result of this economic policy which reduced Indian economic activity – resulting in bankruptcy of the Colonial India Government.

Parallel Great Depression era problems in the US, the Weimar Republic problems – and other issues pushed this ‘National’ government to ram through a series of measures (page 130-131) that inflated silver prices, depressed gold prices and raised interest rates in India. The Indian rupee was pegged at a high exchange rate vis-a-vis the sterling. Indian exports crashed. To ensure that Indian farmers had no options, Indian money lenders were regulated and licensed into paralysis. Further the Lees Mody Pact, gave few options to the Indian producers.

Indians were paid, with inflated and abundant silver stock, instead of gold. This silver was the same silver released by the Pittman Act. The silver buffer solution to the gold drain to India was seen as the “only buffer to protect Western gold reserves against the Indian drain (was) a silver buffer.” Of course, later the British Raj decided to settle Indian debts with promissory notes – and not even silver. It was this Indian ‘sacrifice’ which enabled the recovery of the West.

The yawning trench between talk and walk makes Western economiuc theory suspect.

The yawning trench between talk and walk makes Western economiuc theory suspect.

Crash in silver prices

New mines and increased silver production saw a crash in silver prices. US silver coinage was being depreciated due to increasing supplies of silver. On the other side, Britain had a large debt due to WW1. Britain and America stuck a deal at the cost of the Indian subjects of the British Raj. The US passed the Pittman Act which mandated silver sales at more than a dollar per ounce – double the 50c per ounce prevailing price of silver. Britain agreed to settle all Indian debts with silver. Gold prices were deflated. Interest rates in India were increased. Restrictions on gold imports on were placed and gold demand in India was ‘normalized.’

Impoverishment of India

With crashing exports and increased imports, the Indian citizenry had no option but to pay for all essentials and taxes with gold. As a quid pro quo, for this silver for gold scam, the US lent gold to Britain in 1926, which allowed Britain to revert back to the pre-War old standard.

Done over the protests by Gandhiji, trade bodies and merchants and threats of resignation by the Viceroy and his Executive Council , the resulting ‘money famine’ (page 155) had the Lord Willingdon ecstatically say ‘Indians are disgorging gold’ (page 156). Neville Chamberlain pitched in with his classic statement “The astonishing gold mine that we have discovered in India’s hordes has put us in clover.”

Looking back, it was clear that this achieved nothing but the impoverishment of India. In 1948, Montagu Norman had to admit that with these maneuvers “We achieved absolutely nothing, except that we collected a lot of money from a lot of poor devils and gave it to the four winds.”

The RBI was a vital element of this plan.

Ceterus paribus …

Today, in similar situation, the RBI, a colonial era body, continues with these colonial anti-Indian policies. They keep ever-greening and recycle colonial policies. Old laws with new labels and different wordings are made – with the same intent. Kill the money lender. While all this was happening, Indian agriculture and the peasant suffers.

The tragedy is that RBI is not alone. The IAS (a successor to the ICS) and the Planning Commission are the other two. Compare that with the brilliant track record of modern Indian regulators and organizations like the SEBI, TRAI.

India’s Colonial Cousins – The Drag Coefficient of Indian Bureaucracy

Posted in British Raj, Current Affairs, History, India by Anuraag Sanghi on April 15, 2008

If India’s new age regulators are anything to go by. Indian bureaucracy may be shedding its colonial paradigms.

Colonial Institutions

On April 1st, 1934, while the ‘Squeeze India’ campaign was under execution – choreographed by Montagu Norman, Neville Chamberlain, Winston Churchill (some sickness … some racism) Lord Willingdon, India’s banking authority was set up.

The objective of setting up RBI – this colonial money authority, was to devise a policy structure for creating a ‘money famine’ needed by colonial British masters. From that April Fool’s day till now, RBI character has not changed. RBI resorts to creating these money famines every few years – even today. The last RBI ‘money famine’ in 1996 saw inter-corporate interest rates shoot to 40% – and a recession that lasted for 4 years.

RBI remains isolated, out of touch with the India – and looks at India through colonial viewing glasses. The tragedy is that RBI is not alone. The IAS (a successor to the colonial ICS) and the Planning Commission are the other two. The IFS has been pre-occupied with diplomatically engaging the West, fixated with Pakistan, while India’s relations in neighbourhood are at a historic low.

Compare that with the brilliant track record of modern Indian regulators and organizations like the SEBI, TRAI. Or even the IPS. India has the lowest prison population in the world – and also the lowest police-to-population ratio.

SEBI Logo

Modern Indian Institutions

Till 1990-95 Indian stock trading was largely done done through the open outcry system, physical paper settlements, long settlement periods – and rampant manipulation. Indian stock trading systems was a closed club – and did not attract any serious investors.

Between, 1900-1995, SEBI, NSE, BSE and NSDL designed and managed the transition from the physical platform with the open outcry system to a complete electronic trading platform of the NSE and BSE.

BSE Logo

NSE Logo

Today, the BSE/NSE trading system is the most advanced in the world – in terms of trade volumes, transaction volumes and automation. The NSE does more trades in a day than any other exchange in the world. Compared to the less than 20 lakh (2.0 million) trades on the NASDAQ, the NSE did nearly 70 lakh (7.0 million) transactions(on 3rd January 2008). The BSE (Mumbai Stock Exchange) has more than 6,000 companies listed – equaling NYSE and NASDAQ combined.

All this when less than 5% of Indians are investors in equities.

Nearly one year after this post, soe information about the NSE /NSDL success came out in the public sphere. CB Bhave, who was instrumental in setting up the NSDL revealed, that

NSDL revolutionised the capital market by getting market players to accept the new system of dematerialised shares and debentures. He won buyers’ support by arguing that demat would eliminate bad deliveries of shares and impressed upon the sellers that this would facilitate early settlement and early payments. Setting up of a depository that converts physical share certificates into an electronic form was not easy, but the NSDL set up the depository at under Rs 100 crore, or a seventh of the original estimate, and achieved paperless trading within just three years, the fastest in the world. (from Lunch with BS: C B Bhave)

CB Bhave, who set up the dematerialised share repository, NSDL, revealed some interesting facts. The most interesting is that he felt the need to resign from the IAS – for things to happen.

Bhave resigned from the IAS in 1996, to take up what was then seen as a rather low-profile job — to create India’s first share depository, even though he had the option of going there on deputation. “The job needed full-time commitment from me and from the team I was recruiting. How would I get it, if I did not burn my boats myself?” he says. (via Lunch with BS: C B Bhave).

Telecom In India

Mobile Usage Trickles Down

By 2000, India had less than 4 crore phones. Most of the 100 crore (1billion) Indians were unconnected – and disconnected from the world. Governments monopolies, BSNL and MTNL, ruled the roost. Pricing was based on scarcity – rather than any commercial costing or margin strategy.

Mobile phone services had just been introduced – and were exorbitantly priced. Cell phones were status symbols, out of reach for ‘middle class’ Indians too. With low subscriber base and high prices, it seemed like the investments made in the mobile networks would have to be written off. TRAI, the telecom regulator was finding its feet – and being pulled in many directions by lobbyists. It looked like a classic vicious cycle – which could not be broken.

A Kolkata slum dweller with a mobile  |  Photograph: Jayanta Shaw/Reuters/Corbis; courtesy - guardian.co.uk, Wednesday 24 November 2010 11.22 GMT  |  Click for image.

A Kolkata slum dweller with a mobile | Photograph: Jayanta Shaw/Reuters/Corbis; courtesy – guardian.co.uk, Wednesday 24 November 2010 11.22 GMT | Click for image.

By 2001, the BJP led Government came to power. The telecom regulator in a series of bold moves, changed policies – and equations. Tariffs declined by nearly 5000% – from roughly 50 cents to 1 cent per minute. User base ballooned to 20 crores – from 4 crores. In 7 years more telecom users were added than in the previous 70 years. For the first time, the poor in India are beginning to benefit from technology.

India today is one of the fastest growing markets – and one of the largest. It is dominated by profitable operators, providing possibly the lowest tariffs in the world. The next major test for TRAI is the phasing in the new slate of operators who have been granted licences.

All this when just 20% of India is connected.

Indian Railways

After the boycott of the Simon Commission, from 1927, and the death of Lala Lajpat Rai, it was clear (especially to the British) that their days were numbered. Facing problems at home and abroad, the significant British interest in India was extraction of remaining wealth in Indian hands.

A prime example of that was the railways.

Steam Engines

During WW2, nearly 40% rolling stock from India was diverted to the Middle East. More than 50% of the track system was the outdated metre gauge and narrow gauge. Track systems were nearly a century old. 40% of the railway system went to Pakistan. 32 of the forty-two separate railway systems operating in India, were owned by the former Indian princely states. So much for the British gift of railways to India. More than 8000 outdated steam engines were used as motive power – and less than 20 diesel locomotives were in use.

Starved of investments and maintenance, the railways infrastructure at the time of British departure was crumbling. Colonial British (subsequently, the Indian also) response was to affix the blame onto the employee at the lowest rung and move onto the next one accident.

Post Independent India continued with this practice – till LB Shastri called a halt to this. In 1956, the Madras-Tuticorin express plunged into a river when when a bridge at Ariyalur (Tamil Nadu) was washed away in floods. 144 (some records suggest 156) passengers died. He resigned from the Union Cabinet – claiming moral responsibility for the railway accident.

Indian Railways

This resignation saw LB Shastri become a political legend. This (resignation) also changed the mindset of the Indian Railways. After fresh elections of 1957, one year later, he was re-inducted into the Union Cabinet. Steadily, as railways infrastructure was upgraded, accidents decreased.

It took a non-Congress Government in 1977 to change the face of Indian Railways. Prof.Madhu Dandavate, the Railway Minister in the 1977 Janata Government started the railway renaissance in India. 3rd class railway travel was abolished. Wooden-slat seats were abolished. Cushioned 2nd class seating system was made minimum and standard. Train time tables were re-configured. Reservation systems improved. Railways started getting profitable.

The de-colonization of Indian Railways began effectively in 1977 – 30 years after British departure. Symbolically, that was also the year that the Rail Museum was set up. The progress after that has been remarkable. Today for a US$5, an Indian can travel for a 1000 km.

All this when only 25% of Indians travel by rail at least once a year.

New Paradigms

India needs new paradigms.

Unlike Indian Railways, RBI’s colonial paradigms are a drag on India – and is beyond redemption.

The IAS, is too imperial for any use to India. The IAS with an overwhelming colonial bias towards creating a ‘compliance over-load’ on the back of every Indian has resulted in a Frankenstein of a corruption prone administration.

Planning Commission’s signal failures over the years, in managing economic growth resulted in the Planning Commission being nearly disbanded in the 1991-95 period.


India’s Money Lenders – The Colonial Stereotypes

Posted in Business, Current Affairs, European History, Feminist Issues, Gold Reserves, History, Media by Anuraag Sanghi on April 1, 2008

“Families have lost land, farmers have been asked to prostitute their wives to pay off debts …” writes Krittivas Mukherjee / Reuters.

Market Share Of Indian Money Lenders

Outdated Bollywood Style

I wonder what is the source of Krittivas’s article. I wonder how many prostitutes these money lenders have – from their 2,00,00,000 farmer-borrowers. Which era are you in, Bro. Krittivas? Apparently, the ghost of East India Company is alive, well and kicking. Is this the kind of grovelling that has to be done to be a part of Reuters, Krittivas? Friend Krittivas is reading a lot of colonial era propaganda – and seeing old Bollywood movies.

Even Bollywood has stopped this kind of portrayal of money lenders now. TV serials these days have business families as stars of the show.

A financial newspaper, The Mint, dutifully carries this Reuters article. Published jointly by The Hindustan Times and The Wall Street Journal, The Mint, regularly carries such bloopers. In yet another article that the Mint carried, for instance, writes how Indian “cities began suffering chronic milk shortages soon after independence in 1947″ – implying that colonial India was the land of milk and honey. This kind of editorial blindness nearly makes me believe that the Indian Government got it right with the previous policy of excluding foreign media.

Some Stats About Money Lenders

There are 34,000 money lenders – and they have lent money to more than 2,00,00,000 farmers. They account for nearly 30% of the rural credit flows – and more credit than all the nationalized banks put together. They charge between 18% to 36% p.a. interest generally. Lesser than what most ‘educated’ credit card users pay – and what ‘modern’ banks charge their English-speaking customers.

So much about ‘usury’ by money lenders.

The Seths Who Funded The East India Companies

The vilification of the money lender by the British Colonial Raj at various times for political and economic gains has unfortunately been carried forward in post-colonial India. The English East India Company (EEIC) was initially funded and grew on Indian capital. The House Of Jagat Seth was most famous – and one of the largest banking families in the world. Virji Vora, Shantidas were other merchant bankers who funded the various European Indian Charter Companies in their trade. EEIC officials could not forget their supplicant status with these ‘seths’ – when they were desperate borrowers.

After 1757, and the occupation of the Bengal, Bihar and Orissa, transactions with the East India Company caused the ruin of many Indian lenders.

The other reason why money lenders were portrayed as villains by the the Colonial administrations was merchandise. Instead of bonded producers of Europe, Indian producers were free to sell their product to the highest bidder. The EEIC found that their contracts could be annulled by repaying the advance amounts. And the weavers and other producers could repay the advances by borrowing from the local money lender.

20th Century Vilification

Later during the Great Depression and the so-called ‘Indian currency crises’, Britain was extracting gold from Indian peasants, to overcome its own problems. For British loot to happen and to make their policies effective, they needed to leave the peasant without options. The only way to do that was to curb the money lender. To achieve this aim, between 1925-1940, enquiry commissions were created – and propaganda ‘reports’ flooded the system.

The colonial India Government passed many of the laws restricting money lending activities. These reports - Central Banking Enquiry Committee (CBEC) report (1929) and its associated Provincial Banking Enquiry Committee reports (of Assam, Bombay, Burma, Ceylon, Central Provinces, Bengal, Punjab, et al) of which the Madras Provincial Banking Enquiry Committee (MPBEC) report is cited by lazy academics and out-moded bureaucrats as authoritative – even in post-colonial era.

April Fool Jokers?

April Fool Jokers?

April Fool Joke – The RBI

On April 1st, 1934, while the ‘Squeeze India’ campaign was under execution India’s banking authority was set up – choreographed by Montagu Norman, Neville Chamberlain, Winston Churchill (some sickness … some racism) Lord Willingdon. From that April Fool’s day till now, RBI’s character has not changed. It remains isolated, out of touch with the India – and looks at India through colonial viewing glasses.

The tragedy is that RBI is not alone. The IAS (a successor to the ICS) and the Planning Commission are the other two. Compare that with the brilliant track record of modern Indian regulators and organizations like the SEBI, TRAI.

Legalized Harassment & Extortion

Debt Conciliation Acts were passed between 1933 and 1936 by the governments of Assam, Bengal, Central Provinces and Berar, Madras and Punjab; the Punjab Regulation of Accounts Act (1930) and the Debtors Protection Acts of 1935 and other such burdensome laws buried the money lender in mountains of paperwork and licences. These laws required money lenders to comply with extensive and prolonged compulsory licensing and registration – and extensive recording of transactions and accounts.

What these laws achieved was what was desired – a license for police and other ‘inspectors’ to start an extortion racket from money lenders (these days called corruption). A bureaucrat from colonial Punjab, Malcolm Darling (1925) shedding crocodile tears stated “the Indian peasant is born in debt, lives in debt and dies in debt” became a by line for tarring the money lender – while the cause was extractive, colonial revenue practices.

Options Foreclosed

These restrictions on money lending foreclosed the liquidity option for the Indian peasant, which would have averted the gold outflow from India and the impoverishment of the Indian peasant. With this legalized persecution, money lenders’ activities were curtailed all over India. RBI joined in this hounding of the money lenders – which continues to this day. The Bengal Burma link of the ages was broken. Chettiar money lenders were thrown out of Burma. From being a granary of Asia, Burma started declining – and there was no rice for exports. Result – The Bengal Famine of 1943. Tally – 40-50 lakh deaths. Similarly, the role of Chettiars in Singapore was wiped clean.

After the fall of Singapore, and the rapid Japanese advance, with Subhash Chandra Bose in the vicinity, a revolt by Bengal would have had catastrophic effect on the colonial administration. Howard Fast, in his novel ‘The Pledge’ believes that the Bengal Famine was deliberate creation- possibly to weaken the local population.

Subhash Chandra Bose occupied a large mindshare within and outside India. (Image source and courtesy - editstreet.com). Click for a larger image.

Subhash Chandra Bose occupied a large mindshare within and outside India. (Image source and courtesy - editstreet.com). Click for a larger image.

The RBI, a colonial era body, continues with these colonial anti-Indian policies. They keep ever-greening and recycle colonial policies. Old laws with new labels and different wordings are made – with the same intent. Kill the money lender. In all this, it is Indian agriculture and the peasant who suffers.

Even the rare modern supporter of the money lender does not see the colonial baggage that India and Indians governance carries, sees only half the picture – and little opportunity.

The Pre-WW2 Currency Crisis

After (colonial) India’s accession to the world gold standard in 1898, India rapidly built up a export surplus - and British reserves of gold started drying up – in spite of gold export restrictions to India by the USA, Britain and much of the Western world. There was hysteria in popular press and politicians on the subject of India and its appetite for gold. To overcome this payment crisis, it was decided to pay India in silver released by the Pittman Act. Subsequently, even payments in silver became difficult. India then started getting paid by Bank Of England credit notes.

By WW1 end, it was evident that sooner rather than later, India would obtain independence. Between 1920-40, in a series of measures, it was decided to reverse this policy. Central bankers from the USA, Britain, France and Germany had many meetings to “coordinate monetary policy.” The agenda – gold flow management between themselves and an obvious understanding - don’t let the browns get the gold. They (Hjalmar Schacht, Governor, Reichsbank, Charles Rist, Deputy Governor, Banque de France, Benjamin Strong, USA Federal Reserve, Montagu Norman, Bank Of England) agreed that Indian demand for gold had a “deflationary effect on global liquidity,” therefore “Indian demand for gold had to be regulated.” So, while the West consumed Indian production and goods, they regulated Indian demand for gold!! The result – Bengal Famine of 1943 which killed 40-50 lakh Indians. As Gideon Polya has pointed out, Australian sheep have lower mortality rates.

Like much of Western history, the British (Lord Willingdon, Neville Chamberlain, Montagu Norman, Winston Churchill – as the Chancellor of the Exchequer) executed a scorched earth policy in India. (After all what is brown life worth?) They implemented a series of economic and administrative measures that killed millions in the Bengal Famine would impoverish India – and sustain the empire.

Montagu Norman, Winston Churchill (then the Chancellor of the Exchequer) returned to the gold standard – with the famous prediction by Keynes that this action would result in a world wide recession – of which much came to pass. Churchill confessed “I’m lost and reduced to groping,” but went along with Montagu Norman, united by their racism.

The National GovernmentOn October 27th, 1931, the Ramsey Macdonald led “National” Government (Conservatives and Liberals coalition, fearful of the rising Labour Party) in Britain won a huge majority of 554 MPs of 615. The economic crisis of September (misnamed as the Indian Currency Crisis), ensuing Depression era problems in the US, the Weimar Republic problems – and other issues pushed this ‘National’ government to ram through a series of measures (page 130-131) that depressed silver prices, inflated gold prices and raised interest rates in India.

Done over the protests by Gandhiji, trade bodies and merchants and threats of resignation by the Viceroy and his Executive Council , the resulting ‘money famine’ (page 155) had the Lord Willingdon ecstatically say ‘… Indians are disgorging gold … (page 156). Indians have a different reason to revile Neville Chamberlain who with great satisfaction said “…The astonishing gold mine that we have discovered in India’s hordes has put us in clover …”after impoverishment of the Indian serf.

What Can be Done

The largest rural credit agency system, which knows Indian agriculture like the back of its hand, is available to the Indian economy. Trash the colonial propaganda – and use these money lenders.

Step 1 – Stop calling them money lenders. This term was used and has acquired pejorative connotations.

Step 2 – Bring them under SEBI – an effective organization, not reputed for corruption.

Step 3 – Increase credit supply – and interest rates will automatically fall. Allow re-finance to these ‘banias’ – based on their loan books.

Step 4 – Create credit enhancement tools – by use of traditional adhatiyas, other money lenders, property collateral of the end user, etc.

Step 5 – Induce competition by simplifying registration and inducing initial success for existing and new comers.

These credit experts can become low cost credit delivery mechanisms – which will revolutionize Indian agriculture. Will Indian planners grow out of their colonial moulds? Will Indian legislation go native? Sooner the better.

What Can The Money Lenders Do?

Under generations of persecution, extortion and discrimination has blunted the organizational capability of the ‘native money lender.’ He needs to look at himself afresh – and exploit business opportunities and use his knowledge of the Indian financial ‘consumer.’

A simple outline of an action plan for the money lenders to reclaim their position can be as follows: -

1. Incorporate a holding company.

2. Contribute one lakh rupees capital per member – with 34,000 members.

3. Create a paid up promoter capital of Rs.340 crores – and an IPO for 660 crores.

4. Obtain RBI licence for a rural bank with this paid up capital of 1000 crores.

5. Enrol all money lender members as DSAs.

6. Refinance money lender portfolio – and create further liquidity.

7. Use the money lender network to raise deposits, sell insurance, obtain refinance mortgage for housing, etc.

Even a conservative estimate of Rs.1.00 crore lending, guaranteed by these money lenders can inject Rs.34,000 crores of investment in the agricultural economy in India. SEBI can be co-opted to create appropriate supervisory and oversight measures.

Post Script – The source of Krittivas’s article

It is 6 months and Krittivas has not seen it fit to give sources or details of his dubious charges. So, let me give the details. This entire story of prostitution of wives to money lenders was a colonial idea that the British plagiarised from a very successful French Emile Zola novel, Germinal (1885).

Of course, most of Zola’s work was propaganda for the Socialist causes that were dear to him. The Vatican banned Germinal – and proscribed its reading by Catholics. India’s vernacular press fighting for survival had no sources to overcome this propaganda. Indian English press was, of course, under colonial domination. When Emile Zola died in 1902, he was given a State funeral and the crowd chanted ‘Germinal, Germinal’.

Does this give you some idea, Bro.Krittivas, on how much propaganda we are targetted with, before you start hitting the keyboard.

The World Financial System – Shape of Things To Come …

Posted in Current Affairs, Gold Reserves, History, Satire by Anuraag Sanghi on March 14, 2008

The US President, flanked by Treasury Secretary, Jack Fleischacker, and Paul M.Gruber, Governor, European Central Bank, in a stunning move, announced the merger and re-capitalisation of the IMF and World Bank – a plan to rescue world economy. Forth Knox

IMAR

The new entity has been named as International Monetary Authority & Reserve (IMAR) – and will operate from Paris. It has been given the responsibility for world’s economic stabilisation.

The Governing Council Members will initially comprise of 3 internationally respected financial authorities and investors. The Chairman is likely to be Barran Wolfet and his team members are Sorg Goros and Rim Joggers. “The selection of the Governing Board was done on the basis of consensus and the expertise of the incumbents. This is not the time for being narrow – when the future of the global financial system is at stake.”, said Governor Gruber.

Capital Subscriptions

The US has subscribed to promissory notes worth 25,000 tons of gold, currently held at Fort Knox. The ECB will subscribe to the tune of 20,000 tons of gold – to be held at various European national Government vaults. Australia and Canada have also announced subscriptions to the tune of 10,000 tons of gold each to be held in bonded vaults at Montreal and Canberra respectively. Britain and Switzerland have committed 5000 tons – out of the Bank of England and Schweizerische Nationalbank Eiffel Tower(SNB) reserves. These countries will be allocated voting rights proportionately, based on IMAR gold reserve subscriptions.

The US dollar will now be backed by IMAR promisorry notes – which President Jack Boucher, asserted will create confidence in the US dollar – and in the world financial system.

Governor Gruber remarked,”The Bretton Woods Agreement has facilitated a “historic economic expansion in the global trade” – and this new measure will further strengthen the Bretton Woods system. IMAR single-point agenda is stabilization of the global economy.” Country reserves will be nominated on the basis of IMAR promissory notes – and countries will report on these regularly. Total monetary aggregates for the national economy will also see a change. “Old economic measures like M3 money figures will no longer be relevant in the era of derivatives and options”, said Gruber.

The ASEAN, Chinese and Japanese Governments have cautiously welcomed this move, with a joint declaration saying “this will hopefully lend some stability to the US dollar – and the trillions of reserves that we maintain”. The new martial law administrators in the South African Government are due to the announce their subscriptions soon. Saudi Arabia, Iraq, the UAE and Singapore have announced that they will be committing substantial assets towards their share of subscriptions. Russia is still undecided - and expected to approve soon.

CriticismBack From The Brink

India has criticised the move strongly. Prime Minister, Sonia Gandhi said, “this new system will perpetuate existing economic systems and divisions.” Iran’s President, Mohammed Hussaini bluntly dismissed this development and said, “the developing world will not have a voice in the new organization.”

The new Indian Finance Minister Banta Singh said,”This will not help in restructuring the international finacial systems. This is not the ‘new financial architecture’ that we are want.” When asked what his ideas were were declined to reveal them, as “it too premature.”

The IMAR Governor, Wolfet rejected the criticism, saying, “IMAR will be a international body – for implementing a rescue plan for the world economy. Developing Countries will have 50% representation on the Director’s Register. They, can get even higher voting rights by increased subscriptions. Our past experience shows that countries print currency – and risk global financial equilibrium. We cannot allow that to happen again.”

US and the EU have also announced a doubling in aid allocations. Instead of outright grants in aid, transfers will now be based on mutual trade norms. African countries, for instance, will be able to develop trade with the West – while receiving aid. EU and USA will commit to specific trade volumes, such that Africa will be able to develop, for instance, its mining and resource based industries.

Currency Fluctuations

Inflation & M3 FiguresGovernor Gruber claimed that “currency fluctuations are a thing of the past, as trade will now be denominated by currency demand and supply. International currency acceptance will be determined by IMAR reserves of each currency system.”

Gold ReservesGold Bars

The most interesting part of this development is the quantum of gold being committed by the subscribers. The ECB and the Federal Reserve have been able to fulfill their subscriptions based on gold reserves that they have enhanced in the last few months.

It is being whispered that Barran Wolfet and his team members, Sorg Goros and Rim Joggers had played a major role in the enhancement of these gold stocks – and the formation of IMAR. Initially named as Global Financial Reserve Authority for Development, the IMAR idea was first tossed out over a dinner at the famous Les Ambassadeurs eatery – which offers a classic cuisine by the Ducasse-trained chef, Jean-François Piege.

Want to decode this news? What this really means for you! Ask St.Barnum, The Propaganda Slayer.

Post Script

On 8th October, 2008, it was reported, that both the Republican and Democratic  candidates concede that Warren Buffet

would be a good replacement for current Treasury Secretary Henry Paulson who is standing down at the end of the current administration.

“I think the first criteria, would have to be somebody who immediately Americans identify with. Immediately say we can trust that individual,” said McCain. Buffett, chief of the Berkshire Hathaway holding company, has supported Obama in the race for the White House.

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