A Well-Kept Open Secret: Washington Is Behind India’s Brutal Demonetization Project
Posted on January 12th, 2017

By Norbert Haering Asia-Pacific Research, January 03, 2017

In early November, without warning, the Indian government declared the two largest denomination bills invalid, abolishing over 80 percent of circulating cash by value. Amidst all the commotion and outrage this caused, nobody seems to have taken note of the decisive role that Washington played in this. That is surprising, as Washington’s role has been disguised only very superficially.

US-President Barack Obama has declared the strategic partnership with India a priority of his foreign policy. China needs to be reined in. In the context of this partnership, the US government’s development agency USAID has negotiated cooperation agreements with the Indian ministry of finance. One of these has the declared goal to push back the use of cash in favor of digital payments in India and globally.

On November 8, Indian prime minster Narendra Modi announced that the two largest denominations of banknotes could not be used for payments any more with almost immediate effect. Owners could only recoup their value by putting them into a bank account before the short grace period expired. The amount of cash that banks were allowed to pay out to individual customers was severely restricted. Almost half of Indians have no bank account and many do not even have a bank nearby. The economy is largely cash based. Thus, a severe shortage of cash ensued. Those who suffered the most were the poorest and most vulnerable. They had additional difficulty earning their meager living in the informal sector or paying for essential goods and services like food, medicine or hospitals. Chaos and fraud reigned well into December.

Four weeks earlier

Not even four weeks before this assault on Indians, USAID had announced the establishment of „Catalyst: Inclusive Cashless Payment Partnership, with the goal of effecting a quantum leap in cashless payment in India. The press statement of October 14 says that Catalyst marks the next phase of partnership between USAID and Ministry of Finance to facilitate universal financial inclusion”. The statement does not show up in the list of press statements on the website of USAID (anymore?). Not even filtering statements with the word India” would bring it up. To find it, you seem to have to know it exists, or stumble upon it in a web search. Indeed, this and other statements, which seemed rather boring before, have become a lot more interesting and revealing after November 8.

Reading the statements with hindsight it becomes obvious, that Catalyst and the partnership of USAID and the Indian Ministry of Finance, from which Catalyst originated, are little more than fronts which were used to be able to prepare the assault on all Indians using cash without arousing undue suspicion. Even the name Catalyst sounds a lot more ominous, once you know what happened on November 9.

Catalyst’s Director of Project Incubation is Alok Gupta, who used to be Chief Operating Officer of the World Resources Institute in Washington, which has USAID as one of its main sponsors. He was also an original member of the team that developed Aadhaar, the Big-Brother-like biometric identification system.

According to a report of the Indian Economic Times, USAID has committed to finance Catalyst for three years. Amounts are kept secret.

Badal Malick was Vice President of India’s most important online marketplace Snapdeal, before he was appointed as CEO of Catalyst. He commented:

 Catalyst’s mission is to solve multiple coordination problems that have blocked the penetration of digital payments among merchants and low-income consumers. We look forward to creating a sustainable and replicable model. (…) While there has been (…) a concerted push for digital payments by the government, there is still a last mile gap when it comes to merchant acceptance and coordination issues. We want to bring a holistic ecosystem approach to these problems.

Ten months earlier

The multiple coordination problem and the cash-ecosystem-issue that Malick mentions had been analysed in a report that USAID commissioned in 2015 and presented in January 2016, in the context of the anti-cash partnership with the Indian Ministry of Finance. The press release on this presentation is also not in USAID’s list of press statements (anymore?). The title of the study was Beyond Cash”.

Merchants, like consumers, are trapped in cash ecosystems, which inhibits their interest” in digital payment it said in the report. Since few traders accept digital payments, few consumers have an interest in it, and since few consumers use digital payments, few traders have an interest in it. Given that banks and payment providers charge fees for equipment to use or even just try out digital payment, a strong external impulse is needed to achieve a level of card penetration that would create mutual interest of both sides in digital payment options.

It turned out in November that the declared holistic ecosystem approach” to create this impulse consisted in destroying the cash-ecosystem for a limited time and to slowly dry it up later, by limiting the availability of cash from banks for individual customers. Since the assault had to be a surprise to achieve its full catalyst-results, the published Beyond-Cash-Study and the protagonists of Catalyst could not openly describe their plans. They used a clever trick to disguise them and still be able to openly do the necessary preparations, even including expert hearings. They consistently talked of a regional field experiment that they were ostensibly planning.

The goal is to take one city and increase the digital payments 10x in six to 12 months,” said Malick less than four weeks before most cash was abolished in the whole of India. To not be limited in their preparation on one city alone, the Beyond-Cash-report and Catalyst kept talking about a range of regions they were examining, ostensibly in order to later decide which was the best city or region for the field experiment. Only in November did it became clear that the whole of India should be the guinea-pig-region for a global drive to end the reliance on cash. Reading a statement of Ambassador Jonathan Addleton, USAID Mission Director to India, with hindsight, it becomes clear that he stealthily announced that, when he said four weeks earlier:

India is at the forefront of global efforts to digitize economies and create new economic opportunities that extend to hard-to-reach populations. Catalyst will support these efforts by focusing on the challenge of making everyday purchases cashless.

Veterans of the war on cash in action

Who are the institutions behind this decisive attack on cash? Upon the presentation of the Beyond-Cash-report, USAID declared: Over 35 key Indian, American and international organizations have partnered with the Ministry of Finance and USAID on this initiative.” On the website catalyst.org one can see that they are mostly IT- and payment service providers who want to make money from digital payments or from the associated data generation on users. Many are veterans of,what a high-ranking official of Deutsche Bundesbank called the war of interested financial institutions on cash” (in German). They include the Better Than Cash Alliance, the Gates Foundation (Microsoft), Omidyar Network (eBay), the Dell Foundation Mastercard, Visa, Metlife Foundation.

The Better Than Cash Alliance

The Better Than Cash Alliance, which includes USAID as a member, is mentioned first for a reason. It was founded in 2012 to push back cash on a global scale. The secretariat is housed at the United Nations Capital Development Fund (UNCDP) in New York, which might have its reason in the fact that this rather poor small UN-organization was glad to have the Gates-Foundation in one of the two preceding years and the Master-Card-Foundation in the other as its most generous donors.

The members of the Alliance are large US-Institutions which would benefit most from pushing back cash, i.e. credit card companies Mastercard and Visa, and also some US-institutions whose names come up a lot in books on the history of the United States intelligence services, namely Ford Foundation and USAID. A prominent member is also the Gates-Foundation. Omidyar Network of eBay-founder Pierre Omidyar and Citi are important contributors. Almost all of these are individually also partners in the current USAID-India-Initiative to end the reliance on cash in India and beyond. The initiative and the Catalyst-program seem little more than an extended Better Than Cash Alliance, augmented by Indian and Asian organizations with a strong business interest in a much decreased use of cash.

Reserve Bank of India’s IMF-Chicago Boy

The partnership to prepare the temporary banning of most cash in India coincides roughly with the tenure of Raghuram Rajan at the helm of Reserve Bank of India from September 2013 to September 2016. Rajan (53) had been, and is now again, economics professor at the University of Chicago. From 2003 to 2006 he had been Chief Economist of the International Monetary Fund (IMF) in Washington. (This is a cv-item he shares with another important warrior against cash, Ken Rogoff.) He is a member of the Group of Thirty, a rather shady organization, where high ranking representatives of the world major commercial financial institutions share their thoughts and plans with the presidents of the most important central banks, behind closed doors and with no minutes taken. It becomes increasingly clear that the Group of Thirty is one of the major coordination centers of the worldwide war on cash. Its membership includes other key warriers like Rogoff, Larry Summers and others.

Raghuram Rajan has ample reason to expect to climb further to the highest rungs in international finance and thus had good reason to play Washington’s game well. He already was a President of the American Finance Association and inaugural recipient of its Fisher-Black-Prize in financial research. He won the handsomely endowed prizes of Infosys for economic research and of Deutsche Bank for financial economics as well as the Financial Times/Goldman Sachs Prize for best economics book. He was declared Indian of the year by NASSCOM and Central Banker of the year by Euromoney and by The Banker. He is considered a possible successor of Christine Lagard at the helm of the IMF, but can certainly also expect to be considered for other top jobs in international finance.

As a Central Bank Governor, Rajan was liked and well respected by the financial sector, but very much disliked by company people from the real (producing) sector, despite his penchant for deregulation and economic reform. The main reason was the restrictive monetary policy he introduced and staunchly defended. After he was viciously criticized from the ranks of the governing party, he declared in June that he would not seek a second term in September. Later he told the New York Times that he had wanted to stay on, but not for a whole term, and that premier Modi would not have that. A former commerce and law Minister, Mr. Swamy, said on the occasion of Rajan’s  departure that it would make Indian industrialists happy:

I certainly wanted him out, and I made it clear to the prime minister, as clear as possible. (…) His audience was essentially Western, and his audience in India was transplanted westernized society. People used to come in delegations to my house to urge me to do something about it.

A disaster that had to happen

If Rajan was involved in the preparation of this assault to declare most of Indians’ banknotes illegal – and there should be little doubt about that, given his personal and institutional links and the importance of Reserve Bank of India in the provision of cash – he had ample reason to stay in the background. After all, it cannot have surprised anyone closely involved in the matter, that this would result in chaos and extreme hardship, especially for the majority of poor and rural Indians, who were flagged as the supposed beneficiaries of the badly misnamed financial-inclusion”-drive. USAID and partners had analysed the situation extensively and found in the Beyond-Cash-report that 97% of transactions were done in cash and that only 55% of Indians had a bank account. They also found that even of these bank accounts, only 29% have been used in the last three months.

All this was well known and made it a certainty that suddenly abolishing most cash would cause severe and even existential problems to many small traders and producers and to many people in remote regions without banks. When it did, it became obvious, how false the promise of financial inclusion by digitalization of payments and pushing back cash has always been. There simply is no other means of payment that can compete with cash in allowing everybody with such low hurdles to participate in the market economy.

However, for Visa, Mastercard and the other payment service providers, who were not affected by these existential problems of the huddled masses, the assault on cash will most likely turn out a big success, scaling up” digital payments in the trial region”. After this chaos and with all the losses that they had to suffer, all business people who can afford it, are likely to make sure they can accept digital payments in the future. And consumers, who are restricted in the amount of cash they can get from banks now, will use opportunities to pay with cards, much to the benefit of Visa, Mastercard and the other members of the extended Better Than Cash Alliance.

Why Washington is waging a global war on cash

The business interests of the US-companies that dominate the gobal IT business and payment systems are an important reason for the zeal of the US-government in its push to reduce cash use worldwide, but it is not the only one and might not be the most important one. Another motive is surveillance power that goes with increased use of digital payment. US-intelligence organizations and IT-companies together can survey all international payments done through banks and can monitor most of the general stream of digital data. Financial data tends to be the most important and valuable.

Even more importantly, the status of the dollar as the worlds currency of reference and the dominance of US companies in international finance provide the US government with tremendous power over all participants in the formal non-cash financial system. It can make everybody conform to American law rather than to their local or international rules. German newspaper Frankfurter Allgemeine Zeitung has recently run a chilling story describing how that works (German). Employees of a Geran factoring firm doing completely legal business with Iran were put on a US terror list, which meant that they were shut off most of the financial system and even some logistics companies would not transport their furniture any more. A major German bank was forced to fire several employees upon US request, who had not done anything improper or unlawful.

There are many more such examples. Every internationally active bank can be blackmailed by the US government into following their orders, since revoking their license to do business in the US or in dollars basically amounts to shutting them down. Just think about Deutsche Bank, which had to negotiate with the US treasury for months whether they would have to pay a fne of 14 billion dollars and most likely go broke, or get away with seven billion and survive. If you have the power to bankrupt the largest banks even of large countries, you have power over their governments, too. This power through dominance over the financial system and the associated data is already there. The less cash there is in use, the more extensive and secure it is, as the use of cash is a major avenue for evading this power.

2 Responses to “A Well-Kept Open Secret: Washington Is Behind India’s Brutal Demonetization Project”

  1. Christie Says:

    Hi folks we are the Untouchables of the Indian Colony “Sri Lanka” (Ceylon).

    Read below a Copyright article from the same source written by a good Indian a rare one.

    It is a well known fact in India that the banks got massive deposits before the demonetization. The rich and the powerfull either sensed or knew it was coming.


    Read the above from the same source. The writer is a great guy and is not a Socialist

    India’s Caste System, Social Inequality and Demonetization
    By Satya Sagar
    Asia-Pacific Research, January 12, 2017
    Theme: History

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    For over a millennium one of the recurring debates among Indian philosophers was whether this world was real or a mere dream. To be more precise, the claim was, we are all part of Maha Vishnu’s dream as He sleeps peacefully on a giant serpent, with a lotus blooming from His navel.

    Paradoxically, those who preached most passionately that our senses mislead us and everything around was Maya or an illusion, went on to corner the largest chunk of material reality.

    Behind the smokescreen of clever mythology, it was they, who grabbed the lion’s share of everything tangible over the centuries – from land, water, natural resources to hard political and social power. Worse still, using a mix of brute force and religious mumbo-jumbo, they consolidated the exploitation of those who work by those who merely cook up tall stories, through the nightmare of the caste system.

    Today the politics of Maya is well and truly back in play with Narendra Modi’s ‘Mahayagna’ a.k.a. demonetisation promising a digital Moksha through the tapasya of a ‘war on black money’. Once again, as in India’s sordid past, the biggest losers of this devious push for a cashless economy are going to be those right at the bottom of the Indian caste hierarchy.

    From all evidence so far it is clear, that the Scheduled Castes and Scheduled Tribes, who make up a bulk of those surviving off India’s vast informal economy, are the worst affected by the sudden disappearance of cash from the economy. Labour in agriculture, construction, fishing, textiles, micro-enterprises, the urban and rural poor – mostly from these marginalized castes – have been pushed to the brink of starvation or worse due to loss of jobs and income.
    The other sections hit hard, are small and medium sized farmers, who are overwhelmingly from the different Backward Castes and artisans, mostly from poorer Muslim communities. It is true that demonetisation has also hit the economically and caste-wise better off trading communities, but they seem to have been sacrificed in the quest for complete domination by global and national corporations – who pay our politicians to run the country on their behalf.

    The most apt way to describe what is happening in India today is perhaps through a completely new term – dwijitalisation. Under the new rules of the dwijital economy only the dwij – or twice born as the Hindu caste elite call themselves – will climb still higher up the social and economic hierarchy, while kicking the ladder down to ensure no one can follow.

    Dwijital India will thus continue the rigid division of ‘duties’ along caste lines that has been used for centuries to enable the free transfer of energy and resources from those below to the ones at the top in various ways. The Purusha Sukta, a hymn from the ancient Rig Veda, used the analogy of the human body to describe the social hierarchy clearly.

    The Brahmin priest/philosopher is the mouth, the Kshatriya or warrior the arms, the Vaishya or businessman the thighs and the Shudra or worker is right below as the feet. Those who have to deal with human or animal wastes are much worse off, relegated outside the pale of the caste system itself and rendered ‘untouchable’.

    At its core the idea, which forms the theoretical basis for the Indian caste system, is that the mind and its creations are noble and permanent while the body is impure and ephemeral. Mental work (software) is superior and hence deserves a regular ‘transaction fee’ (think Paytm or Jio Money) from those who perform physical work (hardware), that is inferior.
    In more recent times and through the colonial period, traditional caste privileges and inherited wealth were combined with access to modern education, to create the Indian ruling elite – family-run industrial empires, big landholders and a bureaucrat/politician nexus that today have a complete stranglehold on state power. There is also a sizeable Indian middle class serving the system, that claims its prosperity is due to a mix of merit (ability to pass exams), hard work (long hours in the office)  and honesty (taxes deducted at source).

    Together, all these sections of Indian society, have made best use of new opportunities thrown up by globalization, to establish a society which is easily among the most unequal ones in the entire world. Just 1% of the richest Indians control over 58.4% of the country’s wealth  while the top 10% account for 80.7%. The bottom 50% of the population fights for its share of a mere 2.1%.

    The Modi regime’s current campaign against corruption does not even begin to address the structural bias of the social and economic system in favour of those who have been long-term beneficiaries of illegality and immorality in different forms. Instead, it uses racist tropes to describe ill-gotten money, equating white with ‘good’ and black with ‘evil’. One Modi cabinet minister even called the anti-corruption campaign a war on ‘asuras’ – the dark skinned indigenous people who were conquered by upper caste migrant populations in ancient India and commonly figure in Hindu mythology as ‘demons’.

    Of course, caste discrimination was acknowledged at the time of Indian independence from British colonial rule, thanks to numerous struggles by the oppressed castes. This was reflected in affirmative action policies of reserving a certain percentage of government jobs and admission to educational institutions, as also financial support through loans and special schemes, for these castes.

    However, all these measures have been half-heartedly implemented and  are so woefully inadequate, that  seven decades later there is not a single positive indicator of social development where the Scheduled Castes or Scheduled Tribes figure anywhere near the top. Whether it is land holdings, income, literacy, nutrition or health status it is these sections – who constitute one-third of India’s population – that are right at the bottom of the pile.

    For example, according to the Socio-Economic and Caste Census of 2011, 54% of those from the Schedule Castes were landless, while Scheduled Tribes –despite having somewhat better land ownership were even more deprived due to lack of cash income.  Together these two communities form the most vulnerable section of India’s population.
    Economic vulnerability is reflected in the dire health status of these populations too. In 2015 India recorded the largest number of under-5 deaths in the world, at 1·3 million- most of them children from Scheduled Caste and Scheduled Tribe families. Again among these populations, more than 50% of the people have a body mass index below 18.5, which is regarded as chronic sub-nutrition– placing them by World Health Organization standards – in a permanent state of famine.

    Today, on top of all this, without functional literacy, technological skills or access to  basic infrastructure, these communities are being subjected to a test in digital dexterity impossible for them to get through any time soon. Think about it like this. If someone denied Albert Einstein his daily meal because he could not prove his mettle by playing cricket or made Sachin Tendulkar homeless for failing a quiz on quantum physics they would immediately be denounced as being either mad or extremely evil.

    And yet that is exactly what the Narendra Modi dispensation has done through its demonetisation decree, imposed on the already disadvantaged, a test designed to not just make them fail but also put the blame for their misery on their own ‘ignorance’.

    If there is to be a fightback against such injustice there are three cardinal lessons to be learnt from the history of the Indian caste system and clever myth making.

    One is that blatant lies from those in power cannot be fought with the weightiest of facts because the former are backed by force while the latter is not. In other words, remember when the rulers invite you  for a ‘dialogue’, they are in fact deploying an iron fist in a velvet glove.

    Second – always look behind the Maya of religion, nationalism, culture  to find out who controls things that can be touched and felt i.e. who benefits and gets to own tangible wealth. Everything else is poppycock.

    The third and most critical lesson to pay attention to is – STOP ARGUING, START ORGANIZING!

    Satya Sagar is a journalist and public health worker who can be reached at [email protected]
    The original source of this article is Asia-Pacific Research
    Copyright © Satya Sagar, Asia-Pacific Research, 2017

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  2. Ananda-USA Says:

    The motivations of financial institutions and the US govt are not the same.

    Financial insitutions want to make money from each transaction.

    The US Govt wants a cashless digital society primarily for yrrtorism-related security reasons and economic control of other nations.

    The former enables the US to monitor and locate terrorist organizations worldwide.

    The latter enables the US to control sovereign nations by sanctioning them for “bad” behavior.

    While there is undeniable convenience in a cashless society, it also means that every thing a human being does in this world is monitored, catalogued, analyzed and categorized by unseen unknown people serving a global agenda.

    Big Brother will be watching all of us all the time, and ordinary people will no privacy whatever!


    What the US govt, and others who advocate this global ability to spy on all the people all the time, is that it can be easily penetrated and exploited by criminals, terrorists and enemy nations to cause INCALCULABLE DAMAGE to the economies of entire nations.

    The current consternation in the US political establishment, at the turning of tables by digital hacking and propaganda assault during the Presidential election by Putin’s Russia, is a classic, but relatively-mild, example of what can happen in the future!

    In the future, an entire underground industry will emerge to create alternative identities for people either without any prior digital history, or with multiple fake histories that can be used as needed to temporarily access the benefits of the existing global digital system!

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