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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

#271

Post by wyager »

bharath28 wrote: post #249
wyager wrote: post #193

Earlier quoted context omitted.

Do you have a scientific study backing this up? You just restated the claim that it is a problem.

> a scientific study backing this up? As opposed to the "impression" you got that this was a convenient political talking point? I've bought real estate in India and visibly saw the effects in the last decade - inflation without commensurate change in infrastructure. As to your question of studies, here are some starting points (some dating as far back as 1995). The problem is serious enough for the government to hav…

> inflation without commensurate change in infrastructure.

Inflation isn't tied to infrastructure growth, so not sure why you would expect this In fact, if the government pulls this kind of stuff, one should expect to see inflation without any benefit attached. As I said, messing with money's fungibility makes it less valuable.

> The problem is serious enough for the government

Yes, for the government; it hurts their tax revenue. That doesn't mean it's bad for the economy. I'll read those links when I get home.

>the net cost of the black economy is estimated to be ~12-20% of the GDP,

Black markets almost always increase production. People use them because they're more efficient than government-controlled markets. When they say "costs" they probably mean "the government loses access to".

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

#273

Post by ryanlol »

lmm wrote: post #113
ryanlol wrote: post #84

Earlier quoted context omitted.

> about the absolute uselessness Yeah, no. Even a relatively small amount like 30k is a major pain in the ass to carry around in 100 euro notes. 30k is what one might pay for a car, for example.

If you're spending 30k, paying an extra 20 for a banker's draft is insignificant. And it's not like you buy a car every week. (I also can't imagine feeling safe carrying anything like that much cash around. What if you lost it?)

Banker's drafts can be an even bigger pain in the ass in the EU, with some banks charging percentages for them... And losing one of those tends to be a Bad Thing too.

Anyway, my point was that despite being rare the 200 and 500 euro notes are far from "absolutely useless".

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

#274

Post by soniagupta »

I am not sure if it takes care of corruption completely to be true. Most of ministers and big business people, they have Swiss bank accounts. Though with UP elections coming, it may affect the heat. But again, the ministers are most corrupt and not sure how things will play there. At common man level, I am wondering how much will it help with inflation. Already in last year, the taxes are raised to such a high level that the investments there are already looking waste. With this move, when property prices will be high on paper, but lower in actual, it will also effect the property prices that were paid in full and I am including most of properties purchased by service class people or NRIs, with no black money. Not sure, but just going with words I am trying to draw a full picture here. My investments in India were devalued in last year because of taxes, properties prices are also highly affected. At least as one of one year, this will affect the property prices further. Will it even help common people to a large extent or is it uprooting old Indians while making foundation for lower classes.

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

#275

Post by soniagupta »

I am not sure if it takes care of corruption completely to be true. Most of ministers and big business people, they have Swiss bank accounts. Though with UP elections coming, it may affect the heat. But again, the ministers are most corrupt and not sure how things will play there. At common man level, I am wondering how much will it help with inflation. Already in last year, the taxes are raised to such a high level that the investments there are already looking waste. With this move, when property prices will be high on paper, but lower in actual, it will also effect the property prices that were paid in full and I am including most of properties purchased by service class people or NRIs, with no black money. Not sure, but just going with words I am trying to draw a full picture here. My investments in India were devalued in last year because of taxes, properties prices are also highly affected. At least as one of one year, this will affect the property prices further. Will it even help common people to a large extent or is it uprooting old Indians while making foundation for lower classes.

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

#276

Post by udkl »

owaislone wrote: post #200
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…

It's a card you can play once and will only work against small businesses like restaurants and other stores that deal in cash. The big fish will get away as they most likely already have their money laundered and converted to other assets. They wouldn't be holding all their cash in a garage somewhere like Walter White :) I think the one of the big reasons (if not the only one) of doing this is to be able to introduce…

"...converted to other assets"

These is mainly real estate assets. A lot of this black money is laundered to the builders who in turn do not declare a large part of it. Thus my hypothesis that it is the builders that will be hit the most. I'm expecting a real estate market crash.

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

#277

Post by udkl »

drl42 wrote: post #50
billy8988 wrote: post #28

It is hardly going to fix the black money problem. Rich people have so many employees to do the bank run for them. Within the next month, you will see a huge spike in real estate market. People with black money will dump it in the real estate market. (If you are not an Indian, this is how it works. You buy an apartment/home/building for the amount X. But you declare it to the government that you bought it for X/10. T…

The government has become pretty smart - their standard rates have increased quite a bit (since they lose tax revenue) Secondly, I don't think people are going to touch the old notes - just too much risk involved. Infact, I would speculate that since a lot of black money is now worthless, we might see rates go down, especially for new constructions

I second this comment. Real estate in tier-1 India cities is fueled by black money. Now with people not having black money to invest in the market, I'm expecting to see the trend go downwards.

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

#278

Post by alimbada »

calvinbhai wrote: post #253
titomc wrote: post #133

All the black money is in gold, dollars & euro ! or at the swiss banks. This is not going to smoke out the big players in this game.

you are thoroughly underestimating how many notes are stashed in homes, under the beds, in the walls, in the water tanks and attics.

Your comment reminds me of this: https://media.giphy.com/media/3o7ZeC2C6WBLzdwAQE/giphy.gif

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

#279

Post by [deleted] »

aub3bhat wrote: post #218
pravula wrote: post #205

Earlier quoted context omitted.

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

[deleted]

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

#280

Post by maverick_iceman »

uiri wrote: post #35
h43k3r wrote: post #6

For international readers: Rs 500 and Rs 1000 are the highest denominations notes in India. Other available denominations are Rs 100, 50, 20, 10. This is such a major move to curb black money in the history of Indian Politics and Economy

1 USD is ~Rs 66. That is a staggering difference in purchasing power! I would guess that the only note in the US with a similar reputation which is still issued would be the $100. Notes larger than this ($500, $1000, $5000, and $10 000) have been discontinued since 1946 and actively destroyed by the Federal Reserve since 1969. Isn't there a concern that those who were using these high denomination notes just switchin…

A better comparison would be on the basis of PPP instead of nominal value. Given that India's nominal and PPP GDP are $2B and $8B respectively, $1 ~ Rs.15 PPP.
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