Surviving on fiat money

This was among one of my first posts written on SimplySimple. However it never took shape as I was too busy juggling my blog hosting, learning WordPress and fiddling around with design issues and AD placements…. Fast forward to last week. Our fantastic Prime minister (and his team) pulls another one of his half baked political stunts. He decides that currency notes of Rs 500 and Rs 1000 should be demonetized. This is not the first time that someone has thought of it. It has happened twice before in Indian history -once before India  gained independence from the British and then later on in 1978, under prime minister Morarji Desai. Coincidentally, both of these leaders were/are from the state of Gujarat and have similar ideology.

The effect:

I wonder how many people had to take leave from work to pay for this stunt. This is one of the shorter queues. My colleague says that near his house, the queues had begun 4 hours before the bank even opened. The ATM’s were already empty even though the limit was only Rs. 2000.

While Modi claimed that this would inconvenience hoarders of black money and terrorists. It will obviously fail to do so. In case of terrorists, terrorism has traditionally been government sponso

A good thoughtful article on why black money is so prevalent in India

red or supported by secret societies (which are far richer than governments as they control banking, crime and politics), and the loss of value of stored currency is loose change to their unlimited budgets. It is quite likely that corporates who “bought” Modi to power, other sundry politicians, relatives and some others including the above mentioned king maker societies would have got several months advance notice -not that they would be dumb enough to hold all their assets in cash -that too in Indian Rupees.

When it comes to black money, all the big players would have their stash of money in Swiss banks, in foreign currency shadowy companies run by others abroad or invested in different ventures and real estate both inland and overseas. So who did it hit? Small businessmen and legitimate tax payers? Yes!

News suggests that in the 4 hour notice that they got, people started to buy gold at inflated prices. Those with contacts were even able to buy gold in black -without invoices or on back dated invoices. The very fact that some categories of services were exempted from the ban, allowed such places to be used for large scale money laundering. I noticed various other “schemes” that popped up. I heard the bus conductor reply to a temple priest who wanted to pay with a Rs. 500 note that he would treat its value as Rs 400 instead of 500.

There was another article in the newspaper where someone with contacts in a temple was moving around with an autorikshaw full of coins and exchanging  old notes for 3/4th of its original value. Then there was some news about a local politician, who gave out large loans to farmers from his black money which they were to promptly deposit into their newly created or existing bank accounts. Employers who paid salaries in cash paid their employees in advance for the whole year, thus laundering their money.

Who lost out then? Hmmm… there was this farmer family who sold their land for medical treatment and accepted money in cash. After paying for their medical treatment, they were hoping to buy whatever small piece of land that would fit their budget. Overnight their money became useless and the wife hung herself. Probably they were illiterate or just overwhelmed and didn’t know their options.

Ah! let’s not forget the tax payer who foots the bill for this whole political exercise,  and of course the guy who lost his daily wage or his leave standing in line at the bank or one of those machines which used to be (falsely) advertised as Any Time Money which is still running dry five days after it was supposed to be working. While I was writing this, little did I know that only in January 2017 would people start to be able to withdraw money easily from ATM’s. Still many ATM’s are dry.

The lesson (and the reason for this post):

Paper currency is worthless as an economical safeguard. Your life’s savings can go up in a puff of smoke in an instant. It is just a matter of time…. remember what happened to Kuwaiti currency when Saddam invaded? It can’t even be used as toilet paper because it is so hard and sharp and I wouldn’t dare burn it for heat as God knows how many chemicals, fabrics, plastics and metals inhabit the notes.

In spite of cash being sporadically available at ATM’s and banks from yesterday many of the small shops are still closed as these shops do not accept cards and probably are also desperately trying to figure out what to do with their hoarded money as all of their business is essentially offline, selling the cheapest products with largest margins without paying taxes while charging the maximum retail price without a bill to the daily wages customer. However these shops also sell on credit to customers accepting monthly payments from them.

The windfall has been with perishable goods. I was at the Bengali fish market yesterday and the crowd was half of what it normally is as people had already run out of money. Fish was relatively cheap. I bought four medium sized Tilapia for a ridiculous Rs. 30. There were bigger ones selling for even less which were probably older. The same would hold true for vegetables -especially leafy vegetables as they have a shorter shelf life. If this was summer, things would have been even more cheaper.

From my original post:

So what does a genuine tax paying citizen do in a survival situation?? Reminds me of my Parsi friend Navroz in Bombay. We worked together for several years at one of India’s large Parsi enterprises. He confided to me that he regularly invested in gold. In my mind’s eye I saw him buying gold jewellery for his wife, until one day he gave me the finer details. The Parsi’s unlike people from my community have never forgotten their flight from Persia to escape persecution. However not everyone agrees with the flight theory and some say that they found the Arab competition in the Persian gulf too much to put up with and hence moved to India with their sacred fire and other belongings.*

The gold he purchased was not purchased as jewellery, nor as bullion but in the form of wire. This had two advantages; firstly there were no making (designing) charges for wire and secondly, unlike bullion, a wire could be snipped off with wire nippers and proportionately cut off to pay for necessities in times of emergencies such as this or during war or ethnic/religious cleansing.

Be prepared:

Personally I prefer the 0.5 gram coins which are the smallest available denomination. Firstly this will be of higher purity than that of gold wire or jewellery. Secondly it will come with a certificate of authenticity which will make it easier to give off to someone as holding wire will mean a trip to the jeweller. In a SHTF scenario, you never know whether the jeweller will give you away or pretend that the wire is of lesser purity.

However all said and done, it is still a good idea to hold some lower denominations of currency as they are (hopefully) widely accepted during an emergency. Watching my colleagues get stuck without money for 2 days was difficult. Even today as some people were able to get cash after waiting in long queues, there were a lot of ATM’s which had no money at all.

My other colleague was stuck even worse. I think he is either from the UK or Australia (He sits in another office). His car broke down somewhere and he had no money to fix it. He didn’t have an Indian bank account and the ATM’s were closed so he couldn’t use his International card. Finally one of my friends went to the bank withdrew his daily quota of Rs 2000 and helped him out. Luckily my friend got the money quite fast.

Then there was my newly married friend who just returned from Goa celebrating her wedding anniversary and was scheduled to leave for Rajasthan in the evening. The ATM’s were empty and she had neither her checkbook or passbook. Thankfully she was leaving as part of a church group. I hope she will be able to withdraw money from ATMs there.

Being a survivalist with my bug out bag ready, I have adapted to the Indian way of bugging in and out and have my own combination of bug in and bug out strategies. While I can’t disclose my preparations in detail, I can lay down some general guidelines. All of these should be done in proportion to the number of people in your home and if you have guests who stay over for longer duration you need to factor them in as well.

  • If you don’t already shop online, make sure you know how to do so. I already have my trusted vendors since I’ve been shopping both locally and Internationally for about 10 years now. I even buy organic cow’s milk, vegetables and pulses online as they are not easily available offline. There are lot of people who still don’t know how to buy stuff online here although thanks to large retailers like Amazon and Flipkart this is soon becoming a thing of the past.
  • Hold on to some cash in lower denominations and also in higher denominations in your bug out bag and keep rotating your stash every month so that you don’t end up with old, out of print notes. The stash should be enough to move to another location with your family if the need arises in case of riots or religious violence or ethnic cleansing which can flare up in an instance in India. Remember that technology can fail anytime and in the online scheme of things, the government can freeze your assets at will with the click of a mouse.
  • In the Sarah Connor chronicles, when Derek with his fellow resistance fighters travel back in time, they travel with diamonds which are put in a hidden electrified safe. While trying to sell diamonds in an emergency situation sounds crazy, the principle still applies. Hold some of your reserves in the lowest available weight of gold coin (along with its certificate of authenticity and invoice). I prefer the Swiss certified gold to Indian gold. Remember, the basic essentials of life are few so you don’t need too much of gold or cash and become the target of someone else who was busy drinking beer and rolling around on his couch laughing watching those comedy shows on TV while you were busy preparing.
  • Have extra groceries at home in proportion to the number of people. Unlike Americans who will freeze meat for over a year in their deep freezers, Indians prefer to but things relatively fresh. Rice, dal, salt, oil and flour are more or less the basic or staples you will need. You can build up on that according to your preferences.
  • Learn how to prepare things for long term storage. I will be putting up a section on how to store meat and vegetables for long term storage.
  • Have alternate cooking media apart from your LPG gas. Since I’m an avid camper, I have 7 portable wood burning stoves (I collect wood burners 🙂 ), an electric compact stove and also a petrol burning Primus stove.
  • I eat quite often at small roadside stalls and drink water from there. It is an important part of my strategy since the food is cheap and the water is free. This keeps my immunity up and I don’t have to depend on expensive bottled water. I have never ever fallen sick. If you are suddenly required to do this, you might find that you might end up with a case of upset stomach or worse.
  • You will need to stock up on your medicines. I am not the right person to advise you on this as even though I work for several hospitals and medical treatment is free for me, I almost never take any medicines. I sleep it off for anywhere between half to 3 days and my body heals itself. I think I have all of my sick leave balance for several years now.
  • Remember the barter system still works. Extra things at home and skills can be bartered even after an economic catastrophe.
  • Keep prepaid things in a charged condition. Don’t wait till your balance runs down to zero thinking that you are earning interest on what is in the bank. This includes mobile cards and metro cards. I had to lend my friend my metro card so he could come to work the next day. However I won’t do that again as if I needed to go somewhere in an emergency I would be stuck too as I also gave all of my 100 rupee notes to another friend who had no money and had to travel officially. I made two bad choices one after the other which luckily did not put me in a fix.
  • Those who were spared were those who used the physical envelope budgeting system. It is a good idea to keep a two month supply of cash in them in case something like this happens at the end of the month. My strategy has always been to break up the larger notes as soon as possible and turn them to change. This is only because the bus conductor might suddenly refuse to give you change when you have finished yours and you give him your next big currency note.

All said and done, if you are prepared, make the most of it. Bargain hard with roadside vendors as you will get a better deal as the cash flow in such a situation has come down. they too will be stuck if they have perishable goods. That is the reward for preparation. Don’t feel guilty that you are ripping them off as they rip you off mercilessly all through the year.

Check out the video below to see how bankers scam us. There are other related videos on Youtube.

I don’t think something like this (demonetization) will be done in the near future again. They have to wait till the memory of this incident fades away, like that of 1978. (However there is already talk of limiting how much gold each one can posses) Many of us were not not even born then. Probably it will be the BJP then too or whatever it has morphed into, or maybe it will never happen as we will be on 100% paperless currency which will fulfil the Biblical prophecy which says that only those who take the mark of the beast will be able to buy or sell!

Thanks to our prime minister, we all got a reminder of the value of paper money and were able to do a reality check on our preparedness. it helps to be in readiness instead of falling on the mercy of the government, which of course is no mercy at all! As the scouts motto goes… -Be prepared!!

A more meaningful post about real practical survival finance will follow later and will be linked here.

References :

* Al-Hind: Slave Kings and the Islamic Conquest,11th-13th Centuries Vol 2: Making of the Indo-Islamic World (Al-Hind, the Making of the Indo-Islamic World)

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