At least now, post demonetization, do we have any fresh estimates of the Black Money in the country, or its rate of generation? This would have been a very interesting study to do. Why haven’t we seen it done?
Around 1986 two professors, four readers and a few other management experts of the “prestigious” IIM in Bengaluru have spent twenty or thirty crore rupees to finally determine after eight years that bullock carts are an indispensable medium of transport in India.
But, until now none of those professors were able to figure out and explain to the people of India properly as to why when the USA, which has close to a 20-trillion dollar debt, its currency the dollar appreciates against the Indian Rupee — when we don’t have any such level of debt? And why it is that without India having any such levels of debt why does the Indian rupee depreciates against the Euro or the Pound — that too when even for the forecasted recent economic debacle for post-Brexit Britain many Indian Businessmen have said that they will help to “Bail out Britain”.
Despite having the ability to Bail out Post-Brexit Britain how is it that the Rupee Depreciates against the Pound, and despite post-Demonetization, close to 3-4 Trillion Dollars of Indian wealth, black money was converted into Dollars and Pounds, causing their demand to increase? Then why are we still borrowing money from the World Bank? And via FDI ? This has never been explained by any single Indian Leading/Non-Leading or Professional/Amateur Economist or Financial Experts.
Fortunately or unfortunately, even until today we do not have any calculation of the extent of the Black Money Generation in India, how it is stored and how it is transferred out of India to help every Western Economy….and then how this same Indian Black Money is brought back to India as Foreign Direct Investment ..to generate exorbitant interest? While Sec 2.4.9 of the Finance Ministry report suggests this last as a possibility, why does it stop at that? Why don’t our investigative agencies push to calculate the certain amount? (This will at least give the miserable IIMs some real numbers to work with, instead of consigning the poor blighters to their bullock-carts!!)
But many leading Western Economic think tanks have already predicted correctly that the Annually Indian Black Money Generation is equivalent to its current White Money or GDP? Which means that India is the second largest economy, and not the fourth or fifth as many economists in India believe. If we add the black money generated in India over the past 25 years, since Liberalization, the total black money alone amounts to a whopping a minimum of 30-40 Trillion Dollars, enough to bail out American Debt, European Debt and the British Public and Private debt combined.
It is no wonder at all that suddenly every Western Nation wants to do business with India and get a share of this 40-Trillion dollar pie, which truly belongs to all the hard-working-honest-caring people of India, but is in the hands of a few commercial/political/ industrial/business houses and their lackeys and duly compliant bureaucrats. That is why every economist in India misrepresents this plunder and loot of India as Shining India or Developing India.
The very word Economics is a Greek Derivative whose literal meaning is “home-accounting”. By extension, the country is considered as a home. Any simple, illiterate peasant, un-educated household-head will advise that you have to either live within the means of your income, or raise your income level to match your needs. And this simple peasant will also tell you that you cannot run a family on a constant state of borrowing. And if you cannot repay your debts, the money-lender will either take you to court and go behind your personal assets or will sell them to collect his debt and interest. And any householder will tell you savings for future calamities and maintaining a regular livelihood is the best strategy.
But irrespective of who ruled India, for the last 25 years from the beginning of Liberalization and Privatization, we have been encouraging exactly the opposite policies of “No savings at all”, “absolute spending”, “massive borrowing” and at the worst “encouraging people to invest in stock markets–which are equal to casinos –rather than in savings”. No economist in India has raised a voice against this. Indians Economists want the country to adopt policies of the authorities blindly policies that they will not under any circumstances, implement at their family levels where they would always save money, buy properties, and never invest in gambling stock markets. So why do these economists give approval when the government are doing something that is quite opposite to the fundamentals of economic health, and something that is quite opposite of what they themselves do at home? Or does the word Economics mean to “play and gamble with other people’s money”?
What a pathetic condition for the IIMs and on the other Economic departments in the country to be! The hard-working-honest people of our country had better decide to close down such fit-for-nothing, useless IIMs which do not give any convincing explanation and, more often than not, no explanation at all for what are directly observed phenomena?
However the IIM graduates and Economists of India may answer the above questions, the absolute irrelevance of the IIMs and of the so-called Economists in India and their pencil-eraser-sized brains, became glaringly clear during the recent saga of demonetization. Multi-million dollar paid economists and financial experts from any and every leading institute of India never satisfactorily explained to even the intelligent public as to how the re-introduction of the same currency after completely cancelling it out will prevent the further creation of black money that too when a new denomination of double the cancelled value is introduced, even if the cancelling may re-locate part of the currently existing black money. In fact, if you introduce a higher denomination currency which, in this case, was the 2000 rupee note, you are sending a public signal that you can actually double your black money in the next five years.
When we look at the first demonetization, India used to have currency values of 1000, 5000, 10,000 Rupees. When we demonetized the first time, the objective was to move this black money to Governmental control and use it for Nation-Building as opposed to it being used by petty private interests. To this end all denominations above 100 Rupees, were cancelled these denominations were not re-introduced for a long time — until India came under the regime of liberalization and privatization.
De-monetization as an economic measure has been implemented by several countries including as recently as Spain. However, in no case at all have any of these countries re-issued currency of a higher denomination or even the of the same denomination post the demonetization. Further-more, they have kept post-demonetization restrictions on withdrawals to a bare minimum, so that the newly printed currency, will immediately go back into circulation and get to work towards National re-building.
But strangely, for the first time ever in the entire history of money management, India re-introduced the same-denomination of currency what is even more surprising, introduced a higher-value denomination as well. Somehow, contrary to all past-cases in the world, and contrary to all the laws of Economics as well as of Common Sense, it was somehow supposed to be “A War on Black Money”. We did not hear any explanation that made any sense on this from any Economist anywhere in India. Minimal information that could be obtained in this regard was sketchy outlines by some public interest individuals on the Web.
In theory, the RBI could easily calculate the total number of notes printed since Independence, calculate the total value inside the Banking system, make a few subtractions (e.g. for soiled notes, forex etc) from the former and publish a “if-all-people-were-honest” estimate of the difference which should be the money outside the Banking system at the current point of time, thus giving some indication of the extent of the Black Money in the economy. While, this simple calculation would, by no means be any accurate measure of the amount of Black Money, it does not mean that this calculation should not be done, at least as a first analysis…somewhat like a “first-order-approximation” in scientific jargon.
What has been done, for example in a Finance Ministry Report on the subject is to start from complexity, then have various economists fighting with each other in the same report, so that even in the reports on Black Money published by the Finance Ministry itself, there are big differences in the estimates. So, therefore, it is left to the Public-at-large to do their best to understand what is happening around them.
Let us try to make an estimate of the amount of Black Money in India. A minimum limit can be determined on the Black-cash as follows:
The money deposited by General Public in this demonetization was ~14 Trillion Rupees (~0.25 Trillion USD). So at least these many notes are in circulation in this year; Assume 20% of the notes will be returned as soiled-notes (see IBGC report p53); recall the soiled-note-scandal brought to light e.g. by the Deve Gowda episode and known to have been in existence since the time of T.A.Pai, Mrs. Gandhi’s advisor. These instead of being destroyed, are being returned to the Political Parties of whoever is in power. Over 40 years, this would be 56 Trillion Rupees, or about 0.9-Trillion USD, allowing wide for lower rates in the earlier part of the 40 years. This is the smallest of all numbers. For comparison, note that only one-fourth of it was returned by hard-working Indians in the current demonetization. (Bare-to-Bare minimum un-explained in this recent demonetization is 0.75 Trillion USD…Economists, please tell us what should have been the minimum deflation if 75% notes were properly and successfully annulled? What did public observe in this regard?…Even school-children can answer this question.)
The annual generation of Black Money in India as a fraction of the GDP; estimates on this one vary from 20 to at least 100%; the phrase Black Money and Black Economy perhaps being incorrectly used in each-other’s place (related to each other by a velocity of money whose estimates again vary according to source, or no estimate at all for black-component) Based on this, the amount of Black Money generated since the first demonetization should be at a minimum 30-70 Trillion Dollars, allowing for very heavy variations as claimed in the Finance Ministry Report, and assumptions on the velocity as explained above.
The Black Money in the country can be also estimated from the Black Money outside using internationally available information and our assumption that only about 10% of the Country’s Black Money will be moved outside (more on this 10% figure later).
The CBI report itself confirms over 500 billion USD is stacked by Indians in Black Money in Banks outside. This may be limited to the amount they have investigated, and is the very lowest of estimates, which will imply 5-Trillion USD black inside India. Just before the 2009 elections, Indian media reported that at least 1.4 Trillion USD is illegally held abroad. This is also the same estimate obtainable from a Global Financial Integrity report. From information on our first demonetization for every rupee came through banking system, 10 rupees was deposited by the religious institutions. So in current round, if USD250 billion entered into the banking channel, about 20 * 250 billion went via the Money Lenders – morphed religious institutions. This will give an estimate of USD 5 Trillion as the Black Currency. Next, we take the statement of our Current Prime Minister Honorable Shri Narendra Modi of the promise of bringing 15 Lakh Rs. into every Indian account from the Black Money abroad, this would present a figure of about 5-25 Trillion USD (assuming 1 account per 5- or per 1- person). German, Canadian and French reports say that about 7 Trillion USD belonging to Indians, with probably an equal amount in assets, is in the banking system outside India. So a figure of about 15 Trillion seems to be a reasonable figure for the amount of Black (cash+assets) stacked outside. According to the insider Herve Falciani who says the Government of India has taken only a miniscule amount of the data available with him, “millions of crores” are still flowing out. Even if you assume ‘millions’ means ’5 millions’ and the currency is rupees, this would tell us that about 1- Trillion USD is flowing out. Although, he may not have used the word, if he implied ‘annually’ he most probably did. This figure of 1 Trilllion USD flowing out annually is also the estimate from GFI suggesting that in between 2002-6, the average outflow from all developing countries was 1 Trillion (referred to also in Finance Ministry report 2.7.4). India would have the major share. This would again indicate about 25 Trillion USD is some number for the Indian Black Money held outside, allowing for much lower values in the earlier years.
Thus, the total black cash inside the country may well be at a whopping 5-14-100-150-300 Trillion USD. The lowest being the CBI-accounts-investigated-confirmed figure, the high number stemming from the Falciani Calculation. The most reasonable one is 150 Trillion USD in black (cash + assets) inside India, since this is the figure stems from Honorable Prime Minister Narendra Modi as well as being the estimate of the Germans, the French, and the Canadians.
Recap: Black (Money + Assets) Estimates: Min: 5, Max: 500; Reasonable & Probable: 150 (in Trillion USD)
Please economists, money-managers, financial-wizards, RBI-heads, please answer for us, using even the lowest estimates above:
1) If, not only the Economists of the country, but the Finance Ministry itself go on taking the position “this is impossible to estimate”, “there are too many differing assumptions”, “minimum available statistics-so-we-can’t say”, then what is the use of any economic theory at all? Why don’t the economic theorists close shop and go home? Certainly at least now, if 86% of all the cash in the country were to be reset via the demonetization, using the highest technology we claim to have, then from now on these estimates should be re-doable to within 86% accuracy. So, at least now, post de-monetization, do we have any fresh estimates of the Black Money in the country, or its rate of generation? This would have been a very interesting study to do. Why haven’t we seen it done?
2) Do you have any reasonable studies on the Black-Cash to Black-Asset ratio? This ratio is critical in determining what will happen during de-monetization. What explains the suggestion of a “leading” JNU Economics Professor, who is also called an “expert on Black Money”, that this might be 1% , recent tax raids are being used to show this at 6% (with no inputs on sample-size-details!!), when the figures from the 2012 Finance Ministry report of the Prosecuted Cases (Table 4.3, sec 4.7.12)- all the way from 2006-2012- show this to be at about 50%, this last being the far more probable value?(Strange that the JNU professor has also been quoted elsewhere in the Finance Ministry Report.) One wonders whether the “leading JNU professor, expert on black Money” has even bothered reading the finance ministry report. Would this be acceptable in any other Scientific field? Does his figure make sense when compared also against input from the IBGC (NIBM/Fletcher-CoC) report, which places a very high value on the M0 to M2 ratio in India—over 50%? It would appear that the figure 1% is the absolute upper limit for the Ratio BrainUsed : BrainUnused in India’s educated elite.
3) If you are not to able to estimate the “velocity” of the Black and the White components of the money, then how do you relate the Annual Black-Economy to Annual Black-Money Generation? What is your estimated error in the projection for these two figures? No mention whatsoever of this estimate is made in the Finance ministry report, nor even is a value mentioned for the velocity. Not only that, this report confuses Black Money, Black Income and Black Economy, starting off on the assumption that there is no accepted definition for these terms, then using one definition here, another there, and another from who knows where. (How is this kind of a basic theoretical confusion seen in a Finance Ministry Report—The report being signed off by our President?)
- Request To all JEE-applicants, physics students and Scientists:
- If the Director of ISRO were sign off a report prepared by ISRO scientists on the dynamics of its spaceflights, using the terms “Mass”, “Momentum” and “Energy” (note our corresponding them with the economic terms above) confusing them interchangeably according to whim and fancy, when the spacecraft is in accelerated curvilinear motion, saying that these quantities “are vague and not definable” what would you have to say about this report? Is the spacecraft flying according to scary-complicated equations in terms of immeasurable quantities that cannot be defined? Will any science journal worth the name allow confused utilization of the terms Entropy, Temperature and Internal Energy on the grounds that the Entropy is the indicator of disorder and cannot be estimated? Does any single professor of Physics in the country say that Entropy is a vague term and cannot be defined?
Why are the Economists allowed to get away with this? If none of these quantities are measurable or definable as they say, how do they calculate 1 dollar = 65.5 rupees and its change on a day-to-day basis so exactly?
4) The ratio of Black (Cash+Assets) in India to The Same Amount Held Abroad is another critical number in determining what would happen during demonetization. Not only that this ratio is critical to understand many National-Security issues as well. Do we have any estimate for this ratio? Does the figure in the Finance Ministry’s Report Annexure Table-1 that the Swiss Banks Liabilities towards Indians is Rs 10,000 crores (2010 figure, max 23k crore) make any sense if just one low-level politician in South India spent in the range of Rs 500-1000 crores on his daughter’s wedding post-demonetization? Does this seem to compare with the claim “roughly 72.2 per cent of the illicit assets comprising the [Indian] underground economy is held abroad.” as claimed by “The Drivers and Dynamics of Illicit Financial Flows from India” (pub: Global Financial Integrity) quoted by Sec 2.7.4 of Finance Ministry Report? If these figures in the Finance Ministry Report have any credibility (which they don’t as shown), does demonetization inside India make any sense at all, if 72% of the Black economy is outside India?
5) If the Government’s Finance Ministry report itself is unable to estimate the annual Black Money generation to GDP ratio with standard deviations of over 100%, furthermore, confusing the Black-Economy with the Black Money Creation, then how do they project a deflation-calculation if the Black Money were to be properly, as they claim, annulled? And have they made this projection at all?
6) To all High-School students: What should have been the expected deflation if there was 0.25 Trillion USD in white, and 4.75 Trillion USD Black, if the Black Money was truly and properly annulled? Did we observe anything even remotely close to this? Please repeat this calculation using not the bare-minimum, but using instead the Prime-Minister’s indication on the quantum of the Black Money. What would be the deflation figure in this case? This is a question even a school-child can answer. Even if you make the ridiculous assumption of BMOutisdeIndia:BMInsideIndia = 72:28 still what does this deflation work out to?
7) If this was not the observed deflation in the society, then:-
8) What happened to the Black Money, if it was not somehow re-introduced into the system?
9) Was it the case that the Black Money was transferred outside the country, and is being re-introduced into the system according to the aims and convenience of the foreign geopolitical players, thus prevent the Indian public from realizing the much lower inflation rate that would have been expected? (as we shall see below this may be the only consistent alternative)
10) At what speed was the Black Money re-introduced back into the system?
11) What would have been the impact of the withdrawal restrictions and the supposedly-slow-printing rate on the Velocity of a) the white money b) the Black component? If as the public saw, the Black Money was given out in thousands of crores without restrictions at all, while white-moneyed people stood in line for 4000Rs, would this not result in a much-much higher Black-Money-Velocity than the White Money-Velocity? Thus increasing the Black-Economy several fold?
12) Would the Velocity of the Money change after demonetization? Did you make any estimate of the change? “RBI working paper series 06 31 May 2011” has made predictions on the velocity of the M3-money over various time-span of decades with quarterly variations (this value being now very low, near 1.3). So we would have expected to see this for example in the RBI report on demonetization dated 10 March 2017. We do not see any such forecast. Nor did we see a single Indian media-article using this figure. (The RBI report does however indicates that the M3 component was stable except for a 2-month pre-demonetization high. If the M3 component is stable, but the in this context, the value for M0 figure is more critical, but this figure has not been published. Note also from the graphs in “RBI working paper series 06 31 May 2011” that velocities of M1 and M2 components react differently to the M1 and M2 components themselves. Note also the IBGC (NIBM/Fletcher) report on the very high role of the M0 component in India compared to that of other countries. Note also for example and as expected, that the paper “Velocity of Money Function for India..” shows clearly that the velocity of the narrow money has stayed consistently high over decades, while the velocity of the M-3 component has fallen significantly.) The obvious question that ought to come to the public mind is: If a much higher currency of 2000 rupee note was introduced post-demonetization, and if there was no change in the velocity of money, and with assumptions made on the unavailable M0 value, what would be the impact on the Black Economy, given that the Black Economy is related to the Black Currency via the velocity of money? Wouldn’t it then be set to increase?
13) If the much-smaller white money component itself took several months to print as the government claims, and if this massive Black-Money component was some-how re-introduced into the system before we could even see the common-sense-expected figure for the deflation, how was this miraculous Currency Printing Technology achieved? Was it achieved in India? Or was it outsourced? The answer to this last question is well known. Money printing has been outsourced to companies in the US, UK and Germany; while the issue has been mentioned in the Parliament, no discussion on the implications of this is seen by Indian Security Analysts anywhere.
14) The RBI has refused to answer questions posed under the RTI, clearly stating that there would be a “threat to life” if they answered. Whose responsibility is it to ensure their security? Either the RBI’s economists have completely failed in their duty to the People of India, OR India’s Internal Security Apparatus has failed to provide them the Security and allow them to speak the truth. Either way a change in the country’s way of functioning is required. In section -11, we shall discuss this issue of the “threat-to-life” in more detail.
That none of these questions can be answered and no numbers are given in itself is the proof that the De-monetization is not what it was stated to be, AND it is also proof that the IIMs, the Economic Professors, Financial Experts of the country have badly failed in their duty, relying on big words rather than on solid calculations and theory. If it a question of lack of knowledge or of ignorance in the Economics and finance departments, they better get to some serious studies because they are using Public Money and getting Public Respect. Why have they not done it upto now? But, more seriously, if they have the knowledge and do not want to do this calculation, either out of fear or for selfish cause, then they are certainly complicit with the Fraud and Economic Crimes Perpetuated against the people of India, and are Seditious. We suggest they close shop and go home.
P.S. A polite note to the Physical Scientists and Mathematicians of India
“Laymen Cannot Understand Economics” –is that what we are told? When Physicists can show without any doubt to anyone who sits with them the calculation of the Avogadro Constant at 6.022141086 * 10 exp 23 (mol-inv), or the Boltzmann Constant at 1.38064852 * 10 exp -23 (MKS)—- these Indian economists have the crass ill-mannered impertinence to tell our students or anyone from other departments who questions them that they can’t show to “laymen” the calculation of the Dollar-Rupee Exchange Rate at Rs 67.5, starting with the simple Fischer exchange rate theory, nor can they show the calculation for the rapid rate of change of this exchange-rate which has occurred several times in the past.
Scientists have a duty to their country…when numerical fraud is occurring it is your duty to shout…………… whether it is in your department or not…….Otherwise the theoretical Astrophysicist, who ponders and writes equations governing the deep meaning of the Universe, is no better than the rude Governmental Clerk who when approached for help at his desk says: “Nikal Jao! Yeh Mera Kaam Nahi Hai, Mai Kuch Nahi Jaanta Hoon.”
Scientists from the other fields have a duty to tell the whole country that the more likely reason these economics professors “could not show the calculations to laymen” was that there was a fraud of un-imaginable proportions played out here, and that either the Brains of the IIM’s MBAs and of the Economists were stupefied, or that they were in collusion….most probably a combination of both.
No other group in the country has the ability and fearlessness to plunge into theories and equations as do the Physicists. Everyone else in the country is afraid of theories and equations, which are being used to trick them. You are the only ones who can catch these propagators of chicanery, cheats and tricksters out.
If any self-righteous economist tries asking “You are a layman. Can you understand the term ‘velocity of money’? ”. HIT BACK AT THESE MONKEYS and don’t be afraid to ask them why it is called “velocity” when there is no associated direction. If the Physicists were to understand the answer to this question they would have understood a key element of how the fraud is played out. Starting from here, expose them one lie at a time…one stupidity at a time..one fraudulent equation at a time. Let us remind Indian Scientists of other Departments that it is their duty to SHOUT at these economists-fraudsters!!
Once again, let us remind particularly the physicists of one of their pet subjects: ”The Theory of Relativity” from which basis the Mass-Energy Equivalence stems, the latter having being the critical element of the nuclear-energy release which has devastated Japan. Let us tell them that therefore while the “Theory of Relativity” could in good sense be called the basis of the destruction of Japan’s Hiroshima and Nagasaki, India is being destroyed not by Relativity but by what is called “Relativism”…something that you may have contemptuously said is the work of “useless Philosophers who play with words”, but can’t write a single equation.
Let also the Physicists of India take note, that it is the same power lobby that uses both Relativity and Relativism. The lobby that pushed Relativism into India, earlier primarily via the “Advaita Ashrams” (but now we are already destroyed by it) is the same lobby that pushed the hand of President Truman to drop the bomb on Japan, despite democratic America’s overwhelming public opposition to this move; and it is the same lobby that has pushed this nonsensical term “velocity of money” into economic theory.
If you don’t take some time to step out of the world of Physics to understand this process and challenge this fraud, you are failing in your duty to your society, what is more you may well be un-wittingly perpetuating the destruction of your own society. You alone are capable of helping India now to resolve the mess we are in.
What a tragic twist of fate for a country which claims to have given the Artha-Shastra to the world —this same Artha-Shastra was and being is duly followed to the letter in every Western Country, including in Pakistan, and yet waiting to be utilized for the betterment of the Indian economics.
Now let us look at the current demonetization.
Read this explosive hard-hitting myth-buster, a timely reminder for the decadent Indian society; a masterpiece on Indian geopolitics – India in Cognitive Dissonance only in GreatGameIndia – India’s only quarterly journal on Geopolitics & International Relations.
Next Section 10 From Indian-Economic-Miracle to Anglo-American-Economic Miracle
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