Ever since Rs. 500 and Rs. 1000 notes ceased to be legal tender on Tuesday night, the internet has been full of “human stories” of people for whom tragedy has struck because they are not able to transact.
This is a valid concern – for there is a significant portion of the population without access to banking (numbers in a Mint piece I’ve sent but they’re yet to publish), and access to banking is necessary to do any transaction of reasonable size (there’s only so much you can pay with 100 buck notes).
One fallacy, though, is that people in rural areas, where access to banks and ATMs is lower compared to urban areas, are going to have it harder till the cash gets adequately replaced. While these places may be out of the way, what will help them tide it over is that everyone pretty much knows everyone else.
In Money: The Unauthorised Biography, Felix Martin argues that money is neither a store of value nor a medium of exchange. Instead, it is simply a method to keep track of debts, with the elegance being offered by the fact that money is “negotiable”. If I have a 100 rupee note, all it says is I’m owed 100 rupees. Who owes me those 100 rupees doesn’t matter. “I promise to pay the bearer the sum of one hundred rupees”, the front of the note declares. It just doesn’t matter who the “I” in question is.
In order to illustrate his theory of money, Martin gives the example of Ireland around 1970, when a six-month banking strike left the country’s financial system in tatters. Life didn’t come to a standstill, though, as people figured out ways of maintaining their credits and transferring them.
Initially, people wrote each other cheques. Despite the inherent credit risk, and the fact that they couldn’t be encashed in near future, people accepted them from people they knew. Then the cheques became negotiable, after “reputed community people” such as barmen started vouching for people’s creditworthiness. And so the economy moved along.
Debts were finally settled many months later when the banking system reopened, and people could cash in the cheques they held. A similar story played out in Argentina in the early 2000s when rampant inflation had rendered the currency useless – cities managed to invent their own currencies and life went on.
In a similar fashion, in small towns, and other communities where most people tend to know one another, people are unlikely to face that much trouble because of the cash crunch. Credit is already fairly common in such places, except that it will have to be extended for a longer period of time until the cash supply returns. It is similar in other remote unbanked areas, and perhaps even among tightly-knit communities of businessmen. Systems will spontaneously come up to extend and exchange credit, and life will go on.
The concern, however, is for the urban poor, since they tend to do a large number of transactions with people they don’t know well. In such situations, extension of credit is impossible, and people might find it hard.
Tangu wakati huo Rs. 500 na Rs. "Kama noti za dola za Marekani za dola za 1000 zilipokoma kuwa na thamani ya kisheria Jumanne usiku, mtandao umejaa ""hadithi za kibinadamu"" za watu ambao wamepatwa na msiba kwa sababu hawawezi kufanya shughuli." Hii ni wasiwasi halali <unk> kwa sababu kuna sehemu kubwa ya idadi ya watu bila upatikanaji wa benki (nambari katika kipande Mint I <unk>ve kutumwa lakini wao <unk>re bado kuchapishwa), na upatikanaji wa benki ni muhimu kufanya shughuli yoyote ya ukubwa wa busara <unk> kuna tu kiasi unaweza kulipa na noti 100 buck. Hata hivyo, ni kosa moja kwamba watu katika maeneo ya vijijini, ambapo upatikanaji wa benki na ATM ni chini ikilinganishwa na maeneo ya mijini, ni kwenda kuwa na vigumu zaidi mpaka fedha inapatikana kwa kutosha badala. Ingawa maeneo haya yanaweza kuwa nje ya njia, kile kitakachowasaidia ni kwamba kila mtu anajua kila mtu mwingine. Katika Money: The Unauthorized Biography, Felix Martin anasema kwamba pesa si hifadhi ya thamani wala njia ya kubadilishana. Badala yake, ni njia tu ya kufuatilia madeni, na kifahari inayotolewa na ukweli kwamba pesa ni "kujadiliwa". "Kama kuna noti ya rupia 100 na kuna noti ya rupia 100 na kuna noti ya rupia 100 na kuna noti ya rupia 100 na kuna noti ya rupia 100 na kuna noti ya rupia 100 na kuna noti ya rupia 100 na kuna noti ya rupia 100.""" Ni nani anayenikopesha hizo rupi 100 haijalishi. "Ninaahidi kumlipa mtoaji kiasi cha rupi mia moja", mbele ya noti hiyo inasema. Haijalishi tu ni nani "mimi" anayezungumziwa. Kwa mfano, Martin alitoa mfano wa Ireland karibu na 1970, wakati mgomo wa benki wa miezi sita uliacha mfumo wa kifedha wa nchi hiyo katika vipande. Hata hivyo, maisha hayakukoma, kwa kuwa watu walipata njia za kudumisha mikopo yao na kuihamisha. Mwanzoni, watu waliandikiana hundi. Licha ya hatari ya mikopo iliyo ndani, na ukweli kwamba hawakuweza kukusanywa katika siku zijazo za karibu, watu waliwakubali kutoka kwa watu waliowajua. Kisha hundi zikawa za kujadiliwa, baada ya "watu mashuhuri wa jamii" kama vile bartenders kuanza kuthibitisha sifa ya watu. Na hivyo uchumi uliendelea. Hatimaye madeni yalisuluhishwa miezi mingi baadaye wakati mfumo wa benki ulipofunguliwa tena, na watu wangeweza kukusanya hundi walizokuwa nazo. "Hadithi hiyo ilitolewa na Argentina, ambayo ilikabiliwa na mfumuko wa bei wa bei wa bei ya ""mashine"" na ""mashine"" ya ""mashine"" na ""mashine"" ya ""mashine"" na ""mashine"" ya ""mashine"" na ""mashine"" na ""mashine"" na ""mashine"" na ""mashine"" na ""mashine"" na ""mashine"" na ""mashine"" na ""mashine""." Kwa njia hiyohiyo, katika miji midogo na jamii nyingine ambapo watu wengi huelekea kujulikana, watu hawawezi kukabiliwa na matatizo mengi kwa sababu ya upungufu wa fedha. Mikopo ni ya kawaida katika maeneo hayo, isipokuwa kwamba itabidi kupanuliwa kwa muda mrefu zaidi mpaka usambazaji wa fedha unarudi. Ni sawa katika maeneo mengine ya mbali yasiyo na benki, na labda hata miongoni mwa jamii zenye mshikamano wa wafanyabiashara. Mifumo itatokea kwa ghafula ili kupanua na kubadilishana mikopo, na maisha yataendelea. Hata hivyo, wasiwasi ni kwa ajili ya maskini wa mijini, tangu wao huwa na kufanya idadi kubwa ya shughuli na watu hawajui vizuri. Katika hali kama hizo, si rahisi kutoa mkopo, na huenda ikawa vigumu kwa watu kufanya hivyo.