Why The Govt Should Stop Plotting To Separate Citizens From Their Gold

by R Jagannathan - Nov 1, 2019 12:18 PM +05:30 IST
Why The Govt Should Stop Plotting To Separate Citizens From Their GoldOld bullion bars and coins (Photo by Mario Tama/Getty Images)
Snapshot
  • Gold will disappear from people’s priorities the day the Indian state protects its citizens from its own rapaciousness, when inflation stays low and sustainably so, and when other assets start delivering a better risk-reward ratio.

It is just as well that government sources have denied any plans to launch a gold amnesty scheme to immunise those with unaccounted wealth in this metal from prosecution.

It would have been sheer folly to do so, for the scheme would have been unimplementable without giving bureaucrats even more powers to enter our homes and start digging for gold.

The scheme would have made crooks out of ordinary Indians. Suffice it to say that it would be the rare Indian household – outside the population of the ultra-poor – that does not have some amount of unaccounted gold kept in store for uncertain times.

If anyone in government had indeed thought up the scheme, he ought to have his head examined.

Gold is money. Gold is a safe haven. And gold for Indians is the ultimate refuge when the value of everything else is uncertain. It is this psychology that drives the average Indian’s pursuit of gold in its physical form.

She knows from history that governments cannot be trusted to protect her wealth; on the contrary, the venal state can almost be guaranteed to give citizens endless trouble over minor transgressions of the law.

It is the essential unpredictability of the state, and its capriciousness, that forces the average Indian, even the poor, to keep resources in gold which can be used when the going gets tough.

Gold is the last guarantee of citizen rights, as its value can be used to navigate trying times and buy off harassment by state agents. You can do this with money too, but money is more difficult to hide than gold.

This is not to suggest that gold does not draw crooks. From gold smugglers to gold traders and the super-rich, gold’s anonymity ensures that a lot of it is indeed unaccounted for.

But what government babus and some politicians see as a problem – the ability of gold to stay hidden from official and prying eyes – is really the only thing that guarantees some amount of protection from oppression by the state.

Gold’s subversive qualities – a small amount can easily be hidden by anyone – are what make it an invaluable support to citizen liberties. The fact that some crooks may make hay from this anonymity should not be reason enough to trample on the citizen’s wise quest for gold-based security.

Yes, physical gold is also a risk, for it can be stolen.

But the babus who may – or may not have – have thought up the amnesty scheme should ask themselves a simple question: why would any sane person want to undertake this risk of holding an asset that yields no return unless it provides security that is in excess of this risk?

Gold will disappear from people’s priorities the day the Indian state protects its citizens from its own rapaciousness, when inflation stays low and sustainably so, and when other assets start delivering a better risk-reward ratio.

It is not the business of the government to tell its citizens how they should seek to protect themselves from political, social and economic risks. The government already has its sovereign gold bonds scheme to lure people away from the need to keep physical gold.

If this scheme, which is entirely beneficial to the citizen, is not enough to keep her away from physical gold, the government must trust her instincts. People know what is best for them, not government.

Jagannathan is Editorial Director, Swarajya. He tweets at @TheJaggi.
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