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India demonetisation fails to purge black money

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Re: India demonetisation fails to purge black money

#41
post #12

Earlier quoted context omitted.

I'm not sure. Historically, Indian governments have been most undeserving of our taxes simply because they've misspent it and/or misdirected it to achieve their own means (corruption, buying votes etc). Saying "yes but this government is different" also doesn't hold water when you look at the massive farm loan waivers that were just granted, and more waivers are on their way. How do you think the waivers were funded?…

> Indian governments have been most undeserving of our taxes simply because they've misspent it and/or misdirected it to achieve their own means Can be said of 99% governments in the world.

It is true of government period.

Look at it this way. I have $100. I can either spend all of that $100 on stuff that makes me happy, or I can give half of it to the government which will spend most of it on stuff like schools that my kids won't go to, roads I won't drive on, charity (welfare) for people I don't even know. They're wasting all of my money on stuff that doesn't directly make me happy!

No matter how well a government is run, there will always be people who complain about it, and not without cause.

Of course the alternative (extreme libertarianism) ends up being worse in pretty much every way, but in that case it is the world that is shitty, not some big government.

Re: India demonetisation fails to purge black money

#42
post #23

Earlier quoted context omitted.

From the article you linked: "The ECB says the €500 banknote remains legal tender and will always retain its value."

Yeah BUT you can bet your last dollar or euro that they will ask questions if you show up at a local bank with a few 500 euro notes, 20 years from now. Lots of questions and reports to the police will follow. And they will not be accepted as "legal tender" to settle drug /illegal deals, so they are out, in a way.

Wouldn't you be asked some pointed questions if you walked into a bank with a stack of 500s? I know in the US there are people who run cash based businesses (construction/landscaping for example) that end up having to make special arrangements with their bank to avoid getting the third degree every time they bring in a deposit.

Re: India demonetisation fails to purge black money

#43

>Arun Jaitley, finance minister, on Thursday defended the demonetisation at a conference in New Delhi. He admitted that black money had come back into the banking system, but said that tax officials were combing through people’s accounts to identify and tax it. >He said: “The fact that money has got into the banking system does not mean that it is all now legitimate . . . The money got identified with the owner whom…

This. I think the headline title here is wrong. Prime Minister Modi has always said that demonetisation of Rs. 500 and Rs. 1000 is just the beginning and Step #1. The next step is to probe the bank accounts of these wealthy individuals and give them an opportunity to explain why the Tax has not been paid on it before seizing it.

Unfortunately PM Modi and his government have been constantly shifting the goalposts. In the beginning they did promise demonetization as a way to render all black money null.

Re: India demonetisation fails to purge black money

#44
post #40

>Arun Jaitley, finance minister, on Thursday defended the demonetisation at a conference in New Delhi. He admitted that black money had come back into the banking system, but said that tax officials were combing through people’s accounts to identify and tax it. >He said: “The fact that money has got into the banking system does not mean that it is all now legitimate . . . The money got identified with the owner whom…

Recently I heard that a guy owned 100 trucks is selling his house for quite a low price. Probably lost a chunk of stashed black money. Well, this seems like the effect of demonetization. This is great. The thieves do deserve this.

That is just one anecdote. OTOH 103 people died in the process, productivity was lost by people standing in lines all day, GDP growth declined by over 2%, RBI's credibility has been destroyed. Sure, some rich suffered, but many more poor lost their livelihood.

Re: India demonetisation fails to purge black money

#45

No scheme can eliminate the evils 100%. However, overall it had pretty strong positive impact on economy. Many of the roadside merchants who used to be exclusively cash only, have started accepting dizital payments. All those on-record transactions are now part of formal banking system, instead of earlier don't-bother-about-tax approach. Combine this with the recent roll out of GST, we are on a very progressive path…

Road-side merchants live hand-to-mouth and would anyways not contribute to tax because their incomes are so low. Every study out there suggests that demonetisation was a big blunder, causing a very severe blow to the Indian economy, including the death of 150+ civilians. The real motive for demonetisation was to legitimize the black money of the ruling party BJP and eliminate black money of opposition parties.

If they start using banks and digital payments, one can build credit score and issue loans to them, so they can develop their business. That is not possible today.

Re: India demonetisation fails to purge black money

#47

For people who can't access the link: https://archive.fo/ynouY I am confused with the article though. What would have been a successful result? That the all canceled currencies wouldn't have been exchanged or deposited? I am reading this link: http://www.financialexpress.com/economy/all-rs-500-rs-1000-b... The wording is confusing at best: " nearly 99% of the high-denomination currency notes of Rs 1,000 and Rs 500 th…

I guess question is less of was it successful but rather was it necessary and did the move do any good at all?

One thing I can't understand is, when I look up all the countries/regimes/dictators in history that have tried demonetization, and almost always it was done for the same reason - curbing corruption, black money, counterfeiting etc., and generally it resulted in people losing confidence in the institutions/governments, no real dent in corruption, counterfeiting even decades later. Unless I missed something, it just puzzles me why we would try it now and expect a different result.

Re: India demonetisation fails to purge black money

#48
post #44
post #40

Earlier quoted context omitted.

Recently I heard that a guy owned 100 trucks is selling his house for quite a low price. Probably lost a chunk of stashed black money. Well, this seems like the effect of demonetization. This is great. The thieves do deserve this.

That is just one anecdote. OTOH 103 people died in the process, productivity was lost by people standing in lines all day, GDP growth declined by over 2%, RBI's credibility has been destroyed. Sure, some rich suffered, but many more poor lost their livelihood.

Just out of curiosity, what makes you think RBI credibility is destroyed? Indian Rupee seems to be faring well compared to other currencies. Do you have any data around poor losing their livelihood? Last time I checked, street-side vendors continued selling stuff. Most poor people would rarely deal with 500/1000 so I don't know where is this coming from.

Re: India demonetisation fails to purge black money

#49
The black and grey market are vital checks against government corruption and repression. The people arguing that eliminating cash is good because it prevents people from hiding their financial activity are basically taking the stance that we'd be better off without privacy and trusting all of our information to government officials. It's a dangerous delusion.
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