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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

#161

Post by slg »

Scirra_Tom wrote: post #132
slg wrote: post #119

Earlier quoted context omitted.

The grandparent comment wasn't comparing arbitrary units, they were comparing the units of each country's currency denominations. The largest active legal tender in the US is worth $100 while the largest in India was worth $15 (now will be $30). I think it is a fair assumption that those numbers aren't arbitrary and that some thought went into choosing those denominations. That gives you insight into the economies of…

Largest banknote in UK is £50, largest in EU is €500. That does not imply a staggering difference in purchasing power between £ and €.

I wasn't particurarly supporting the argument that it is a foolproof way to measure buying power. Just that the decisions central banks make about their currency denominations aren't arbitrary and they do lend insight into the economies that they manage. The €500 probably isn't about buying power but it does tell something about the motivations for easing a transition to the Euro. In fact, now that the transition has been completed, the bill is being phased out. I wouldn't be surprised if that was the plan from the beginning.

Things in the UK are a little more complicated with their multiple central banks, but the £100 note is still being printed and while uncommon, it is in circulation throughout the UK.

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

#162

Post by mkagenius »

solutionyogi wrote: post #52

I am originally from India, living in NYC for last 10 years. Black money is a major problem in India, it's directly fueling This is an ingenious way to handle the problem at its root. I don't know how Government is going to handle this transition in a country as big and diverse as India. Personally, I prefer the rip-off-the-band-aid approach. The only thing I disagree with is the ATM daily/weekly withdrawal limit (10…

> I think this withdrawal limit is too low and would inconvenience lot of folks

Yup. If someone needs to pay for medical emergencies, they will suddenly have to ask for help from lot of people.

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

#163

Post by spikengineer »

ijafri wrote: post #131

Strange, in Pakistan it's the opposite Govt issued Rs. 5000 note which is equal to INR 3171 because otherwise people were using USD 100 bills .... and only making USD stronger locally.. I still don't get how they are going to keep big guys from keeping USD $100 ... I would keep an eye on USD vs INR in coming weeks

Hoarding large amount of foreign currency is illegal in India as per foreign exchange management act.

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

#164

Post by fa17 »

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?

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

#165

Post by twblalock »

abraham_s wrote: post #134

500 and 1000 Ruppee note cease to be legal tender as of today midnight. Everyone who has them can get it exchanged for 100 ruppee notes in banks,post offices etc until Dec 31. You need to provide a valid id to do an exchange, which means that the transaction will be traceable and Income Tax department (Indian version of IRS) will be matching them to declared income. ATM and banks are closed for the next couple of day…

I would imagine that most of the wealthy Indian tax evaders have their money in Swiss bank accounts rather than large stacks of rupee banknotes hidden in their basement.

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

#166

Post by leafee »

Spivak wrote: post #79
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),…

Isn't this a trick that will only work once? Wont the people who are taking advantage of black money start using a different store of value that isn't controlled by the Indian government like foreign currency or high value commodities?

Technically, yes. You can even just start using 100 rupee bills instead.

But what this does is adds cost to doing business secretly in cash. Also it increases the threat of government taking another bold move in the future to flush out more stores of black money. Basically, it increases the risk of operating outside official accounting, making that option more scary and less appealing.

Watch for real estate crash in New Delhi. On paper there wont be a crash but sharp growth, because the declared transaction value is about 40% of the real transactions, the remaining being in cash. With this move, declared values will move up, while actual values will move down.

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

#167

Post by rm2889 »

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 bullshit (overpaying for public infra, raw materials - contracts going to the highest briber etc.)

So unless that changes (more difficult than logistically declaring pieces of paper illegal), maybe people will start hoarding other stores of value in the future and figure out other ways to evade taxes. Am I being too cynical?

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

#168

Post by Nano2rad »

Fighting illegal black economy is fine, but withdrawal of notes is not for that. There are other hidden agenda to this. RBI cannot go back from its promise of providing the value of the currency. This is psychological experimentation. Today Rs. 500 is withdrawn, tomorrow all currency could be withdrawn. This trying to deploy state power but without bearing any fair cost

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

#169

Post by codeisawesome »

Ar-Curunir wrote: post #127
naveen99 wrote: post #114

cash has always been a hot potato, particularly in india, due to high inflation. the elephant in the room remains real property registration / valuation / tax reform. only a matter of time. This is one of the silver lining's of the modern surveillance state.

Eh? What does this have to do with surveillance?

Seriously? Tracking every transaction gives a complete illumination of every individual's life to any government.

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

#170

Post by [deleted] »

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…

[deleted]
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