Finance and Economics > Economic News, the Global Economy and all Things Monetary

Chaos as India eliminates two largest banknotes without warning

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mountainmoma:

--- Quote from: Endurance on November 09, 2016, 06:20:55 AM ---This isn't about counterfeit, it's about getting their hands in the pockets of the middle class and rich. This is a nation that doesn't trust its backs and most transactions are face to face for cash. People store their entire life savings in cash. If you have a few thousand roupees, no problem. You'll be able to exchange them for the new money in a few days. If you have a few million, the government is going to come knocking and will likely seize their 60% or take it all since the tax amnesty period is over.

I suspect this will lead to the storing of foreign currencies in the future. You're safer exchanging for dollars and storing them than waiting for this to happen again.

--- End quote ---

This was my first thought about it as well, but then trying t read the popaganda posters, seems the propaganda posters are talking about conterfiet.

Yeah, I was am thinking they are going to take assets if you cant "prove" it was from income that was already taxed, and who keeps that kind of records ?

ANd, what if this becomes a trend in other countries. Think about it coming here. Here the rich may not have millions at home, they can always have offshore accounts, but the middle class and lower class likes to have some cash around, at least I have noticed this, and how are they going to prove where it came from ? Her, the government is going to say, as they already do, that it must be from drug trade, prove that it isnt.

surfivor:

Some BS from the NY times and other notes

http://www.nytimes.com/2016/11/09/business/india-bans-largest-currency-bills-for-now-n-bid-to-cut-corruption.html

"The new policy puts India at the “leading edge of countries restricting the use of high-denomination currency notes that are now seen as mostly fueling illegal activities rather than legitimate commerce,” said Eswar S. Prasad, a trade policy professor at Cornell."

...

For the next two weeks, people will be able to exchange only 4,000 rupees a day, or about $60. People holding vast sums of unaccounted for cash will find it hard to exchange the money at banks because they will need to explain where they got it, risking tax investigations, experts said.

“If I walk in with two crores,” Mr. Kejriwal said, using the Indian term for 20 million rupees, or about $300,000, “people will be worried that the government will be tracking my name and address.”

surfivor:

 I don't quite understand it but I get the impression that the people in India all support the currency ban very enthusiastically. The claim seems to be everything is done in cash and people don't pay any taxes .. Here is an article and I posted some of the comments below which there are numerous. I did not really see any negative comments and have not come across criticism regarding what was done 

http://timesofindia.indiatimes.com/india/Ban-on-currency-How-it-was-kept-a-secret-how-its-hurting-ministers/articleshow/55345737.cms

"amazing PM and a true governance.. what a move to curb hoarders.. never heard in 30 years at least of a PM who works so hard in national interest.. India is blessed to have NaMo as PM!! "

..

" NAMO knows how to keep secrets...great leader he. India is fortunate to have him at helm to stear India'' s destiny to prosperity. Long live Modi..long live India"

..

"Modiji did the entire operation even better than any armed forces operational move
This is efficiency par excellence
It''s a lesson for one and all "

..

"Hats off to Mr. MODI
His style of working is remarkable.
JAI HIND !! "

David in MN:
I've avoided commenting because none of this makes any sense to me. How will India's massive rural and small town population comply with this? It's not rare to find communities where people will have to walk miles just to get to a bank.

There's got to be more to this story than meets the eye right now.

FreeLancer:
I was talking to a guy from India and he said that you can't use the exchange rate with the USD to get an accurate idea of who this policy is targeting. These rupee notes function like the $100 note does here and is similarly used by the rich to transfer wealth under the table to avoid taxation, which is apparently a national pastime that favors the haves far out of proportion to the have nots.  Think suitcase full of stacked Benjamins, not mason jar in the cupboard with rumpled twenties and tens.

Apparently there are white and black pools of money and it's common for purchases of high value items, like BMWs and gold jewelry, to be made with both, with a portion of the purchase price reported on the official books as a white money transaction, while the remainder is paid in black money under the table.

This guy said that this is an attempt to reduce the epidemic of under the table transactions by rendering the necessary stack of money too high to fit under the table.  He's also confident that the black money will find a work around, eventually.

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