When China invaded India in 1962, the Indian government used the opportunity to issue gold bonds with the aim of making the people part with their gold. In a remarkable display of its naiveté, the government promised to repay the bond holders in rupees despite the fact that people held gold to insulate themselves from the ill-effects of a depreciating rupee.
Unsurprisingly, not many people took the unwise step of purchasing these bonds with their gold. Soon, the government used direct methods to coerce people into surrendering their gold and imposed various controls, including a ban on possessing gold bars and coins.
In a move eerily reminiscent of these events, the government once again plans to grab the gold in the country. Those who control the economy describe gold as a “dead investment”, oppose its import, and talk of putting the “gold to work”. They have already imposed new penalties in the form of taxes and duties and have considered issuing new gold bonds. Although bonds issued in the near future may claim to be redeemable in gold, the government is sure to use some future event to whip up a frenzy of patriotic sacrifice and justify substituting the gold repayments by paper currency.
Among the chorus opposing the ownership of gold are the voices of finance minister P Chidambaram and those of economic advisers C Rangarajan and Raghuram Rajan. They do not admit that gold is real money but call it an “unproductive investment”. If they believe their own claims, they should not swap the government’s hoard of rupees and paper instruments for gold but must use their paper to work wonders with the economy. They should also thank the people for sacrificing their valuable rupees and pumping it into the economy in exchange for mere gold.
Clearly, the aim of the rulers is to take the gold in the country and enrich themselves. Traditionally, the rulers have enriched themselves by printing money and giving themselves a share of this newly printed money. Printing money depletes the value of any savings held in rupees while simultaneously increasing the total money in the government’s possession. It thus transfers a portion of the total savings to those in power without the homes of ordinary people being physically raided. This process fails when people hold their savings as gold, which is why gold has become a target of government takeover.
As the global economy teeters on the verge of a massive collapse, the only method to protect one’s wealth is to convert it to real assets like land and gold. Poor people who cannot afford to buy real estate can only buy small amounts of gold. By taking their gold, the rulers rob them of the fruits of their labor and expose them to economic devastation.
India is the single largest storehouse of gold with most of the gold owned by women. If the advocates of the government takeover of gold truly believe that their suggestions are not immoral, they should not outsource their actions to the government. Instead, they must go into villages unaccompanied by security guards and compel poor women to exchange their gold for worthless pieces of paper and face the reaction of the villagers.
Significantly, the proposals of Raghuram Rajan, the government’s chief economic adviser, favor foreign bankers who seek to hoard gold to protect themselves from a major economic collapse. Raghuram Rajan was formerly with the International Monetary Fund and is currently affiliated with the secretive BDT Capital based in Chicago. He also works for the University of Chicago whose endowment fund operates like a hedge fund with a portion of its investments tied to gold. Yet, Raghuram Rajan opposes the ownership of gold by Indians who want to protect themselves from the impending economic downturn.
The opposition to the import of gold means that the government will send the gold that is taken over from Indians to foreign bankers in exchange for paper currency. This move would be as insidious as the British act of shipping several tonnes of gold out of India to Britain’s bankers in the 1930s. At that time, the British faced opposition from Indian freedom fighters. Now the Western powers no longer plunder India by ruling over the country, but their Indian proxies efficiently perform the job for them without any opposition.
Unlike government currencies which depreciate due to the incompetence of government economists, gold provides economic stability and any plan involving the surrender of gold to the government must be actively resisted.
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