Between Informality and Formality: Hundi/Hawala in India

Courtesy of Marina Martin @ LSE blogs:

In modern parlance, remittance systems like the South Asian hawala or hundi system are largely referred to as part of the ‘informal economy’. For the most part, they have garnered this kind of label because these remittance systems operate outside the modern banking domain, and are often deemed to have little or no paper trail. Why does the hundi/hawala system function outside, or at the fringes of, the modern banking system? The main reason is that it has been made illegal in a number of locations.

image

In India the word ‘hawala’ has become a notorious byword for the underbelly of the economy, or the black market. The term hundi is used synonymously with hawala in places like Bangladesh and Pakistan. However, in India, the term hundi has become detached from hawala and has been immortalised as denoting old bills of exchange, as seen by the specimens in the Reserve Bank of India Museum. And yet a quick glance at several primary sources as well as several historians’ accounts shows that hundi was a remittance system operating (barring technological advances) in a similar way to hawala as we understand it today. Continue reading

Afghan opium poppy yield hits all-time high

image

Afghanistan produces more than 80% of the world’s illicit opium, with profits helping fund the Taliban. Photograph: Goran Tomasevic/Reuters

Courtesy of The Guardian:

Opium poppy cultivation in Afghanistan has hit an all-time high despite years of counter-narcotics efforts that have cost the US $7.6bn (£4.7bn), according to a US government watchdog.

The UN Office on Drugs and Crime reported that Afghan farmers grew an “unprecedented” 209,000 hectares (523,000 acres) of opium poppy in 2013, surpassing the previous high of 193,000 hectares in 2007, said John Sopko, the special inspector general for Afghanistan reconstruction.

“In past years, surges in opium poppy cultivation have been met by a coordinated response from the US government and coalition partners, which has led to a temporary decline in levels of opium production,” Sopko said in a letter to the secretary of state, John Kerry, the defence secretary, Chuck Hagel, and other top US officials.

“The recent record-high level of poppy cultivation calls into question the long-term effectiveness and sustainability of those prior efforts,” he said on Tuesday.

Continue reading

Will Our Private Savings Be Sacrificed To Pay Down The Public Debt?

image

Courtesy of Adam Taggert @ Peak Prosperity:

Recently, an article by Daniel Amerman caught our attention. Titled Is There A “Back Door” Method For The Government To Pay Down The Federal Debt Using Private Savings?, it details the process known as financial repression, where sovereign debts are slowly paid off by syphoning private savings from an unaware populace.

In this week’s podcast, Chris discusses the mechanics of the process, as well as its probability, with Dan:

To understand financial repression, we have to understand that we’ve been there before. Many nations have gone through periods in the past where they’ve had very high levels of government debt. And there are four traditional ways of dealing with that.

One of them is austerity. Everyone understands that. You raise the tax rates. You lower the government spending. This is a painful choice. It can last for decades. And what do you think the voters think about that?

There is another option and this we can call this the Argentina option. And that’s defaulting on government debts. It’s radical. Everybody understands it. How do the voters feel about it?

There is a third option is rapidly destroying the value of currency. Creating high rates of inflation that very quickly wipe out the true value of a national debt. But that also wipes out the true value of everyone else’s savings and salaries and so forth. It is such an obvious process you can’t really hide it. So how do the voters feel about that?

Those first three – they all work. They’ve all been done before. But they’re all very painful and make the voters very angry.

Now there is a fourth way of doing this. There’s nothing controversial about its existence; it’s not the slightest bit controversial for professional economists or people who have studied economics extensively. It’s financial repression. And it works. It’s what the advanced western nations did after World War II. It was a process that took 25 to 30 years, depending on the country. The West went from an average debt as a percentage of national economy from over 90% to under 30%. So we know it works in practice. Continue reading

The billions of wasted NHS cash no-one wants to mention

image

Image: Art band KLF burn a million pounds

Courtesy of Caroline Molloy @ Open Democracy:

Calls to solve the NHS cash crisis by charging patients have mounted this week, with the NHS Confederation calling for £75 a night ‘hotel fees’ for hospital stays, or much longer waiting lists.

But there is one pot of money that sits curiously unexamined, glistening and untouched.

It’s the cost of the NHS ‘market’ itself. Administering the hugely expensive artificial ‘marketplace’ created by successive governments to allow both NHS and private ‘providers’ to compete with each other to offer services to NHS and other ‘purchasers’.

No-one knows the exact cost of this bureaucratic ‘marketplace’. A recent estimate by rebel Lib Dems put the figure as high as £30billion a year. Dr Jacky Davis and other doctors and campaigners including the National Health Action Party have put it at £10billion a year. The Centre of Health & the Public Interest put it at a ‘conservative’ £4.5billion a year.

Even the most conservative of these estimates is a yearly amount which would, if re-directed away from useless market activities, fund both the £2billion annual NHS shortfall and free critical social care to everyone, which the Kings Fund’s Barker Commission recently said would cost ‘substantially less’ than £3billion a year.

Despite fierce urging from expert MPs to look at what the ‘market’ costs the NHS more closely, the government, mainstream media, think tanks and policy makers have dismissed, ignored and even suppressed this information, with unevidenced assertions that ‘modern healthcare systems’ need vastly expensive bureaucracy, market or no market.

Successive governments wedded to ‘market reform’ have refused to produce useful figures that would definitively establish the cost of the NHS market. It has been left to academics, MPs and activists to try and fill the void, through historical and international comparisons, as well as tentative attempts to cost different activities that are forced on the NHS by the ‘market’.

Hiding the figures

In 2010 the Health Select Committee found that running the NHS as a ‘market’ cost the NHS 14% of it’s budget a year.

The Select Committee noted that the NHS would have some administration expenses even if it didn’t run itself as a ‘market’. But they noted evidence from the NHS Chief Historian, Professor Charles Webster that in the pre-market late-80s, the NHS spent only 5% of its budget on administration.

The difference in administration costs pre- and post-market – 9% of the NHS budget – is over £10billion a year of the current £120bn budget. That’s more than the entire cost of every GP in the land. Continue reading