The sadhu's dreams, gold and swiss bank accounts

So the sadhu dreamed of 1,000 tons of gold (amazing how precise his dream was, how come mine never are?).. let us suppose it is actually found and the UP government gets it. What will happen to the economy? For a start, certainly the UP government will get wealthier – presumably they will sell the gold and raise cash which they will proceed to spend. Where will that cash go? Back into the hands of people – which people? Probably government contractors, party workers and the like. So what has happened? Has the total wealth of UP increased? It is hard to see how it would. The main effect would be to transfer wealth towards contractors and party workers. Will the total money supply increase? No, because the UP government cannot affect money supply – only the RBI can. The total amount of gold in the economy will certainly increase – which will cause gold prices to fall and those who hold gold today will lose some of their wealth. Since they are mostly haorders, perhaps that is what they deserve. Then there is a clamor for getting the black money back from Swiss Bank accounts (this is also a certain sadhu’s dream, of course, so the two are really the same) – after all, there is much more of it than a few tons of gold is worth. The money in swiss bank account is presumably in the form of dollars or swiss francs, not INR. If that money is brought back, it will have to be converted to INR first, or kept in the reserves of the RBI in its current form, just a transfer of ownership. If it is converted to INR, the INR will certainly rise relative to the USD and euro and so on – which may seem like a good thing, but just ask my friends the software exporters..!. Apart from the price effect, though, does the wealth of the country increase? Again, hard to see how this can happen. It is already the wealth of the country, since it is presumably held by Indians for whatever purpose, and will be spent by them for whatever purpose, sooner or later. The wealth will simply get transferred from private hands into the hands of the government. So, again, it is a matter of wealth transfer not wealth creation. If we think the government spends money more wisely that private individuals do, we should welcome such a move – if we think not, we should not... simple as that.