Progressives have salivated for a “war on cash” ever since the invention of digital money. Allowing the populace to have possession of their finances is way too much freedom when compared to the digital form that must be stored in easily taxable banks. As reported and applauded by many news outlets, Indian Prime Minister Narendra Modia has taken the first shots in the war by announcing that 500 and 1000 rupee notes would become worthless by the end of the year.
Owners of said bills have until then to either deposit the notes (and take a haircut if the amount seems suspicious to the government) or exchange up to the equivalent of $65 per day for other currency. To put this in perspective, these bills are the equivalent of $8 and $15 respectively and account for 80 percent of the money supply in India.
Proponents of the plan state that it will curb counterfeiting and prevent the wealthy from hoarding cash to elude taxes, but it has had dramatic effects on the lower classes in a country where 95 percent of small businesses and traders deal in cash. As expected, this has been the reaction:
One of the more interesting phenomena occurring from the ban is the rise of the honest “Nigerian Prince scam”.
In the dishonest version a person is contacted, generally through email, and given a sob story about how the author is in an authoritarian state and has a large amount of currency they need to smuggle out of the country so that it isn’t confiscated. They offer the victim a percentage of the money in return for allowing the use of the victim’s bank account. All of this is followed by a request for account information and when successful, the scammer drains the account instead of adding millions to it. In the honest version playing across India, the wealthy are turning to their employees and others and asking them to deposit sums of around 250,000 rupees, an amount that won’t be scrutinized by the government.
Maids, drivers, nannies, and cooks in India are experiencing unusual politeness from their employers. Beyond the work they do every day, they suddenly have another use – to launder the undeclared cash which the rich have been hoarding in steel wardrobes, under the mattress and in under-bed storage.
The money is to be kept in the account until a safe point in the future where it will be withdrawn minus a fee to the depositor. While there are other methods such as buying and exporting gold or paying employees months in advance, the “honest Nigerian Prince (not-a-scam) is perhaps the most inventive and goes to show that no matter what a government does to attempt to strong-arm tax money out of its populace, some will find a work around to keep what is theirs.”