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India's demonetisation of Rs. 500 and Rs. 1000 notes

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Re: India's demonetisation of Rs. 500 and Rs. 1000 notes

#211

Post by rm2889 »

intended wrote: post #195
rm2889 wrote: post #167

While this sounds great on face value, I doubt this'll solve the root of the problem. Why did we have so much black money in India? Coz people didn't want to pay taxes. Why didn't people want to pay taxes? Because they got nothing in return. Governments (esp Indian) have been historically self serving and power hungry. Tax money is usually either lost by PSUs loaning to the Mallyas of the world or other corrupt bulls…

Hey it's you! there's quite a bit that has been achieved by successive Indian govts on shoe string budgets. We've had the green and white revolutions, the IITs and other edu programs, large medical programs, ISRO (and the sensing tech that comes with it). This is from a once impoverished country which later had to deal with the fallout of weaker institutions, brain drain and corruption/dacoity/booth capturing and a w…

Hmm as much as I'd like to agree with you, don't think its necessarily spurious on the facts.

https://en.wikipedia.org/wiki/Corruption_in_India

From another perspective, the Rs 1000 note was demonetized in 1978 as well to curb unaccounted money. More than 30 years later, we've had to do it again because the underlying problem wasn't solved.

https://en.wikipedia.org/wiki/Indian_1000-rupee_note

Maybe this time it'll work. Time will tell.

Re: India's demonetisation of Rs. 500 and Rs. 1000 notes

#212

Post by dingo_bat »

yummyfajitas wrote: post #181
dingo_bat wrote: post #150

Earlier quoted context omitted.

In India USD is worthless. I don't know why people would use other country's money unless their own economy is under heavy stress like Zimbabwe or Colombia.

This isn't true at all. You can't buy an auto ride, but USD and Euro are used as reserve currencies. If nothing else, inflation is significantly lower than for rs. A surprising number of people have asked me if they could change their black money with me for dollars at favorable rates.

Can you use USD as currency in India? I haven't seen a single place that would accept that.

Re: India's demonetisation of Rs. 500 and Rs. 1000 notes

#213

Post by sundarurfriend »

rm2889 wrote: post #167

While this sounds great on face value, I doubt this'll solve the root of the problem. Why did we have so much black money in India? Coz people didn't want to pay taxes. Why didn't people want to pay taxes? Because they got nothing in return. Governments (esp Indian) have been historically self serving and power hungry. Tax money is usually either lost by PSUs loaning to the Mallyas of the world or other corrupt bulls…

That's a catch-22, and most often just an excuse used by people to self-justify.

> lost by PSUs loaning to the Mallyas of the world

That's at least loads better than the money never reaching the government as tax and thus never becoming a matter of public record. Such publicly recorded "corrupt bullshit" are significantly easier to fight than the silent menace of black money.

> Governments (esp Indian) have been historically self serving and power hungry.

Projecting past governments' performance onto the current one and keeping your money hoarded, means that this govt doesn't have enough money to do significant good, which in turn helps such people justify to themselves that "the government doesn't do anything with it anyway". Thus the catch-22.

While the Modi government is nowhere near some "Ram Rajya" (said phrase being part of the problem), it's at least taking several steps in the right direction, and placing a little trust in it to spend the tax money reasonably well seems like a gamble with pretty good odds at this point.

Re: India's demonetisation of Rs. 500 and Rs. 1000 notes

#214

Post by mapt »

mohanmcgeek wrote: post #85
parennoob wrote: post #55

Earlier quoted context omitted.

I agree, this is a good first move to get black money that is stored as cash out and taxed. Some forms that still remain are: * Gold * Money funneled into "agricultural income" (which is tax free) * Large properties in metros that are bought and left empty (which raises rates sky-high for ordinary middle class people trying to buy a house there) However, this move is brilliant in that it removes cash as an intermedia…

The extra becomes useless starting tonight.

No, that's a legal fiction. It becomes useless as soon as there's no way to extract value from a briefcase of Rs.500 and Rs.1000 notes. Tomorrow, someone can trade it in to the Bank of India in exchange for new notes, it's just that this someone needs a plausible reason for holding the money - they have to have paid taxes on enough income that they could theoretically have legal reasons to possess the money. This does not have to be the current owner turning the money in, it can be anyone the current owner pays a premium to in exchange for clean bills.

So tomorrow, the money will need to be laundered in order to help the owner. But a few months down the line, the Bank of India stops taking deposits, and the money becomes actually useless.

Re: India's demonetisation of Rs. 500 and Rs. 1000 notes

#215

Post by mars4rp »

totalZero wrote: post #196
mars4rp wrote: post #129

Earlier quoted context omitted.

which government? US? that was Iranian money frozen 39 years ago plus interest. India? that was owed oil money due to sanctions. I don't understand how you are capitalist until the other side is Iran.

This is totally unrelated to capitalism as a structure and paradigm for an economy. Let's momentarily set aside the issue of whether the US owed Iran 1.7B dollars. There are arguments on both sides but I want to point something out: The cash payment was made at the same time as the release of four Americans by Iran's regime. The Obama administration has admitted that the cash was used as leverage in negotiating their…

as you said it was used as a LEVERAGE not a ransom. US had to pay this money anyway, by timing it right they had more LEVERAGE in the negotiations and 4 innocent people got out of prison.

What is wrong with that? painting this payments as ransom is wrong.

Re: India's demonetisation of Rs. 500 and Rs. 1000 notes

#216

Post by shripadk »

rm2889 wrote: post #167

While this sounds great on face value, I doubt this'll solve the root of the problem. Why did we have so much black money in India? Coz people didn't want to pay taxes. Why didn't people want to pay taxes? Because they got nothing in return. Governments (esp Indian) have been historically self serving and power hungry. Tax money is usually either lost by PSUs loaning to the Mallyas of the world or other corrupt bulls…

After 60 odd years of corrupt rule by various Governments anyone would be cynical. So no there is nothing wrong with being cynical.

However, India has formally asked Britain, through an official letter, to extradite 60 fugitives (including Mallya/Lalit Modi) during the bilateral talk held between Mr. Modi and Mrs. May yesterday: http://www.financialexpress.com/india-news/narendra-modi-the...

A formal extradition request wasn't even sent (for the 60 fugitives) during the UPA rule. So I definitely feel that things are now changing for the better.

Re: India's demonetisation of Rs. 500 and Rs. 1000 notes

#218

Post by aub3bhat »

pravula wrote: post #205
greglindahl wrote: post #115

Earlier quoted context omitted.

It's worth noting that withdrawing certain banknotes is a classic move. Here's North Korea doing it in 2009: https://en.wikipedia.org/wiki/North_Korean_won#2009_revaluat... And the US did it in 1969: https://en.wikipedia.org/wiki/Large_denominations_of_United_... In both cases it appears that the main goal was tax revenue. In NK, against private traders, and in the US, against organized crime.

And India doing it in 1978 ( http://www.thehindubusinessline.com/money-and-banking/highva... )

The difference is in the sheer volume of currency being taken out of / replaced from circulation almost 80% of the value.

https://twitter.com/d_jaishankar/status/796012168873320448

Re: India's demonetisation of Rs. 500 and Rs. 1000 notes

#219

Post by shripadk »

fa17 wrote: post #164
aub3bhat wrote: post #32

This is the boldest and probably most brilliant move by any Indian politician since liberalization of economy in 1990s. Having said that, another way of understanding this is that as of today both old 500 Rs and 1000 Rs notes have been "probabilistically devalued". For anyone in middle class and below the value essentially remains the same (other than a small devaluation due to effort required to get them exchanged),…

Reading about it, looks like this has been done before in India in '54 and '78. Has black money decreased since then?

You can't compare '54 and '78 with 2016. Removing 500 and 1000 rupee notes as legal tender in 2016 accounts to more than 80% of total cash circulation. This is huge.

Re: India's demonetisation of Rs. 500 and Rs. 1000 notes

#220

Post by shripadk »

rm2889 wrote: post #211
intended wrote: post #195

Earlier quoted context omitted.

Hey it's you! there's quite a bit that has been achieved by successive Indian govts on shoe string budgets. We've had the green and white revolutions, the IITs and other edu programs, large medical programs, ISRO (and the sensing tech that comes with it). This is from a once impoverished country which later had to deal with the fallout of weaker institutions, brain drain and corruption/dacoity/booth capturing and a w…

Hmm as much as I'd like to agree with you, don't think its necessarily spurious on the facts. https://en.wikipedia.org/wiki/Corruption_in_India From another perspective, the Rs 1000 note was demonetized in 1978 as well to curb unaccounted money. More than 30 years later, we've had to do it again because the underlying problem wasn't solved. https://en.wikipedia.org/wiki/Indian_1000-rupee_note Maybe this time it'll wo…

You can't compare 1978 with 2016. Removing 500 and 1000 rupee notes as legal tender in 2016 accounts to more than 80% of total cash circulation. This is huge. 1000 Rupee note was a very small percentage of cash circulation in 1978.
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