Currency Demonetisation and Future course of Indian Economy

[darshhan]

IT guys aren't rookies in this business. Masking income as agricultural has been tried since time immemorial. Here is what they will do:
1. Assess the yield of the farm, and allow say 5 years profits as being legitimate; and make a demand on the tax for the balance
2. Check if said farmer has taken loans in the past - as long as the last of the installments haven't been paid disallow any savings from prior periods - so if farmer took a loan in 2004 and made payments till 2014, allow only the estimated profits between 2014-2016 as savings
3. And if IT officer is a crook, harass the farmer, get a payoff in mangalyaan and allow the entire proceeds

This is a civil matter, not a criminal matter. Burden of proof rests on the assessee in this case the "farmer".

Nice in theory - Is that your assessment of what happens or is likely to happen in practice in India for the most part?

yep IT guys do call "farmers" for scrutiny. And thorough assesment is made.

[disha]

Well, keep in mind that it is all a cycle. You will pay less at the store, but your employer will also make less revenue and they will cut wages or slash jobs. Overall, the average salaries will go down, so you may not feel as happy as you might expect.

If your employer is growing (as in a goldilocks economy)., how will it make less revenue?

[disha]

Is it just me? Why is most of rona-dhona about unavailability of small change coming only from the it-vity capital of India., Bengaluru, Kerala?

[ShauryaT]

There's no option to voluntarily decide whether or not to comply anymore. They had the choice to do all this during the IDS that ran from June to September. Anyone with black money could have paid much less tax then, than they are now liable for. As for now ? You deposit, and after paying penalty you keep the rest. If you don't deposit at all, your cash net worth is Rs.0 .

We continue to disagree. Many compelling techniques have been used in the past and have always failed as was the IDS plan. Your answers are vested in better and if necessary forceful compliance. I am saying these alone will not work, as it has not in the past and the future is no exception. I will repeat this adage again, if there is a choice to an average BM person to pay 50% tax and convert the rest to usable proceeds or loose 50% and launder the rest, the choice being taken is to launder - and continue to avoid the tax net. You have your logic on why it will be hard to do so at scale, I have mine too, along with some noted folks, who disagree with your confidence in BM wielders to not be able to launder successfully.

What has been achieved here is the BM holder has taken a haircut and the effects of this haircut will be felt in good and some bad ways too. e.g: Effect on real estate prices would be a much needed relief, its downstream effects on construction jobs and other effects of this haircut in reduced spending will be a negative effect on the economy. Net-Net, we will see after Dec or March.

[Karthik S]

Well, keep in mind that it is all a cycle. You will pay less at the store, but your employer will also make less revenue and they will cut wages or slash jobs. Overall, the average salaries will go down, so you may not feel as happy as you might expect.

On the other hand, the competition for big ticket items will be more fair. You will compete with another person who has worked hard or harder for his money, not someone who has higher buying power just because he evaded taxes.

So each Rupee can get more goods than earlier, but it will be harder to earn that Rupee.

I think you are talking about a scenario wherein there is an economic downturn, leading to stagnant wages and/or job losses, as happened during recession times. But the situation now is opposite of that. All this while, people have been paying more than the value they got out of a product or service. The demonetization will settle that discrepancy. Price will reflect the actual worth of a product.
Sure the prices will come down, but you forgot the volume factor while considering the revenue. The decrease in price will be more than offset by the increase in the sales volume in many businesses.

[Katare]

Currency in circulation on -
8th of Nov - 16.27 Lakh Corer (100%)
9th of Nov - 2.27 lakh Corer (14% of 8th Nov)
28th of Nov - 4.76 lakh Corer (29.29%)

Currency Banned on
8th of Nov - 14 lakh corer (86% of total)

70% of the currency (11.5 Lakh corer) is still missing in the economy from what the size was on 8th of Nov.
60% of de-legalized currency (8.4 lakh corer) has been deposited (or exchanged) in the banks
40% of de-legalized currency (5.5 lakh corer) is still with the citizens
17% of the de-legalized currency's value (2.49 lakh corer released out of 14 lakh corer delegalized) has been released in the economy
29.4% of all the bank deposits made since 8th of Nov, have been withdrawn/ exchanged ( deposited in bank 8.4 lakh corer and withdrawn/exchanged 2.49 lakh corer)

From this it appears to me that Govt may not release more than 55-65% (double of what is in the system today) of what was in the economy as cash on 8th of Nov. They may try to achieve this by releasing substantially more Rs 100 notes and forcing/conditioning people to use digital medium.

Demonetization may be a well thought off slow grind so brace for a long run while money trickles down slowly

Piyush Goyal in a debate in Rajya Sabha mentioned that Reserve banks tracks the serial numbers on notes to see how often and at what interval they come back to the banking system and it has noticed patterns where a large number of the notes either don't come back at all or come back after many years. This is what was being referred to as dead capital and black money. May be this is the slack that they are after....time will tell

[ShauryaT]

yep IT guys do call "farmers" for scrutiny. And thorough assesment is made.

At what levels? At a practical level, choices are made on who to go after and who not. The below does not mean, any recoveries are made.
Farms grow massive incomes for select few

The Income Tax Department has launched an investigation on those reporting farm incomes of more than Rs.1 crore a year. Official data pegs this number at 307 in assessment year 2015-16, up from 180 in assessment year 2007-08. The Department is probing 2,746 such cases — Bengaluru recording the highest of 321 followed by Delhi with 275 and Kolkata with 239 cases — from across the country.

These laundering mechanisms are common enough for even folks like MS Alhuwalia to remark in public.
Watch after 28:20

[Suraj]

We continue to disagree. Many compelling techniques have been used in the past and have always failed as was the IDS plan. Your answers are vested in better and if necessary forceful compliance.

Any disagreement on your part right now is purely academic. It was a real discussion until Nov 8, i.e. "is this cash productive or not". Right now you're disagreeing with me, "should this toilet paper theoretically have value ?" Sure, feel free to disagree until the cows come home and figure out whether toilet paper 'should have value'. It STILL doesn't make it worth any more than toilet paper...

I am saying these alone will not work, as it has not in the past and the future is no exception. I will repeat this adage again, if there is a choice to an average BM person to pay 50% tax and convert the rest to usable proceeds or loose 50% and launder the rest, the choice being taken is to launder - and continue to avoid the tax net.

I urge you to look at the proposed amendment to the IT Act. It makes the penalty dependent on voluntary or involuntary admission. In other words, come forward and deposit your old cash, and you pay a lower penalty than if they find out later without your prior admission, or find that you lied in your admission. That's very good policy - step forward and get leniency. Keep trying to hide, and get a cripping penalty.

You have your logic on why it will be hard to do so at scale, I have mine too, along with some noted folks, who disagree with your confidence in BM wielders to not be able to launder successfully.

I'll simply remind everyone on 'your side' that you may have logic but no cash. You literally have no leverage of any kind . You can try to launder money, and while a few people may succeed, you'll be walking around with IT's crosshairs on you all the time, and that'll cost you business every day when your competitors have no such worries. ESPECIALLY when GST comes around. Good luck trying to convince upstream and downstream business colleagues to operate in black under GST - to take a haircut on THEIR credits to benefit you, and increase THEIR taxes to benefit you. That'll work out pretty well...

What has been achieved here is the BM holder has taken a haircut and the effects of this haircut will be felt in good and some bad ways too. e.g: Effect on real estate prices would be a much needed relief, its downstream effects on construction jobs and other effects of this haircut in reduced spending will be a negative effect on the economy. Net-Net, we will see after Dec or March.

Yes, negative effect. On the BLACK economy. Aren't you tracking RBI data ? Approx Rs.8.11 lakh crore / $125 billion - 60% of the cash outstanding - has been deposited. Backing that is maybe 5x as much economic activity, all of which is now official economic activity too. Notionally, GDP has already risen by that much, solely from all that's been reported so far, and will show up in official GDP when the CSO/MOSPI collects the corresponding activity data. The remaining 40% can disappear entirely and the GDP will still have a net positive. The 'economy is going to fail' argument is a day late and a dollar short, already.

[Suraj]

Welcome back, Katare!

[Gus]

Do we know what's the trend on deposits ? Slowing or increasing? Slowing would mean BM is still stuck ? And increasing means it's exchanged hands and the last guy on the line is reporting it as legit with some fraud involved ?

[Gus]

. Going to a 'neighborhood' TASMAC on a weekend evening exposes you to a crowd that make Uruk Hai look civilized - it's for good reason that most of them have iron grills protecting the storefront.

The one near my place has iron bars forming walkways to and from the storefront. Must say it's better this way than jostling with the unwashed which is a skill set I've unlearned.

[Suraj]

It's slowing down. However, I think that's exactly how it would work. Between Nov 10 and Nov 18, 5.11 lakh crore was deposited. Between Nov 10 and Nov 27, the figure is 8.11 lakh crore. Overall, that's ~60% of the outstanding cash deposited in 2.5 weeks (out of a total of 50 days / 7 weeks). The smart money is back in the banking system. What's left is mostly the hold outs or those who are illiquid and trying to make whole. E.g. moneylenders who have loaned out but want to call in loans or will only take payment in new cash, which leaves them without much leverage. My guess is that in another week from 27th, it will cross 10 lakh crore, and by Dec 30, will touch maybe 13 lakh crore. Depending on how many decide to fold, as opposed to go down with their ship SS Black Money, it could touch 14 lakh crore.

So far, the rate of deposits far exceeds what I assumed it would be. I'm surprised the banking system has been able to absorb so much cash in so little time. All this talk about problems have to be seen in the context of the sheer numbers we're talking about. Rough numbers are 8.11 lakh crore in deposits, 2.2 lakh crores in withdrawals, 36K crore exchange. Those are ridiculously huge sums, and that's just the cash. The actual economic activity being formalized and taxed in future is a multiple of that 8.11 lakh crore figure.

[suryag]

Suraj gaaru, i was thinking that for the scheme to be successful the amount deposited+exchanged shouldnt exceed 8 L crores? Now if everything comes back to the banks barring 1-2L crore, would that help our clamp on BM, given everything is white and there was no BM to start with

[Karthik S]

The success of the scheme is based on getting accountability of cash that citizens have, so that citizens who have not declared their income and thereby evaded paying tax, will do so post demonetization. It will be a success regardless in both the scenarios wherein either most of 500/1000 notes are accounted for and enters formal banking system or the notes that are not accounted for on Dec 31, will be taken off from RBIs balance sheet.

[Suraj]

Suraj gaaru, i was thinking that for the scheme to be successful the amount deposited+exchanged shouldnt exceed 8 L crores? Now if everything comes back to the banks barring 1-2L crore, would that help our clamp on BM, given everything is white and there was no BM to start with

Well, 8 L crore is just deposits so far. It'll keep growing with each passing day. Some leakage is to be expected, considering just the opinions of posters here, who vigorously assert that black money is useful / GoI is corrupt / etc. Whatever doesn't come in , is just a liability off the RBI's balance sheet which means they have authority to expand the monetary base by that additional amount.

In the end, GoI wins regardless of what choice the BMers take. They declare and pay tax/penalty - GoI gets those taxes as a one time bonanza. They destroy their cash = RBI eliminates it from balance sheet, and that's effectively liability-free balance sheet expansion for them.

The two main calculations here were: a) will the population comply rather than revolt and b) does it engender compliant tax behavior in future ? The point a) has been overwhelmingly answered as yes. People have already deposited back more than 60% of the cash that was circulating, in a third of the total time. I don't think any other major economy with a large informal economy could have done this. For example, even Trump could never muster the popular support to accomplish such an act - half his country doesn't even want him to become president. They are hardly going to suffer inconvenience for his sake, even for a good cause.

On point b) there are a lot more steps to be done. Modi has already revealed one of the steps, i.e. aggressively prosecuting the Benami Act of 2016. I suspect that he doesn't want to reveal too many cards yet. He just wants the BMers frightened waiting to see what he'll do next, while he takes his time to announce the next action. Giving a definitive idea of his next actions too early would allow them to plan. It's ok to say that benami acts will be pursued because land is hard to transact, with no black money buyers.

[hanumadu]

Suraj gaaru, i was thinking that for the scheme to be successful the amount deposited+exchanged shouldnt exceed 8 L crores? Now if everything comes back to the banks barring 1-2L crore, would that help our clamp on BM, given everything is white and there was no BM to start with

Any thing that does not come back will be an immediate scoring point for DeMo. Even if it is 1 lakh crore, its more than the 35k crore obtained from VIDS. Any tax collected from the deposits will be further scoring points. Of course, a 3 lakh crore unreturned money would have been great for Modi, but even 1 lakh crore is not bad.

[saip]

Somewhat OT

I went to Universal Studios in LA. Went to a cafe bought some snacks and a coke. They game me glass which looked very much like the one you get in fast food restaurants. Just the Universal logo on it. After I filled the glass at the machine and finished my snacks and went for a refill. But the machine said no refills. How did it know? Any wild guesses? (BTW there were no barcodes etc on the cup which i could see)

Hmm.. I like puzzles. Temperature/IR sensor? (Used cup will be cooler.) Activated metallic strip? (Magnetic sensor.) Optical sensor? (To detect liquid residue.) Little imp/sprite living in the machine? Or a self aware AI?

Nope. None of those. That I posted it here is the clue. It is an RFID chip, square one slightly bigger than the squares you find on the Rs 2000 note. So if the Universal studios can do this on millions of these cups it must be very cheap. There is adhesive transparent sticker at the bottom of the cup (I have peeled it off and will post the photo when I get time). So, what is preventing the Govt of India from hiding one in 2000 rupee note?

[Karthik S]

So, what is preventing the Govt of India from hiding one in 2000 rupee note?

May be because Rs 2000 notes are just for stopgag arrangement and that will be again taken off once the situation is settled down.

[Bart S]

Hmm.. I like puzzles. Temperature/IR sensor? (Used cup will be cooler.) Activated metallic strip? (Magnetic sensor.) Optical sensor? (To detect liquid residue.) Little imp/sprite living in the machine? Or a self aware AI?

Nope. None of those. That I posted it here is the clue. It is an RFID chip, square one slightly bigger than the squares you find on the Rs 2000 note. So if the Universal studios can do this on millions of these cups it must be very cheap. There is adhesive transparent sticker at the bottom of the cup (I have peeled it off and will post the photo when I get time). So, what is preventing the Govt of India from hiding one in 2000 rupee note?

What would be the use of this? Might prevent counterfeiting (but then again, ordinary folks don't walk around with RFID readers, and it is possible to clone the signals from RFID chips and make duplicates as well - RFID only makes sense if each one is encoded with a unique ID that is somehow verifiable). But sure as hell wont stop black money, might actually aid it by helping to validate people's BM stashes.

And unlike the bullshit that was circulating on whatsapp claims, it isn't possible to read any such signals except in very close proximity. So isn't useful to locate stuff either.

[hanumadu]

These laundering mechanisms are common enough for even folks like MS Alhuwalia to remark in public.
Watch after 28:20

Nothing new that was not discussed here already. We don't need MSA to prove them they are common. The thing is how effective will they be to hide large sums. You claim very effective while others don't believe so. Time will tell.

[ShauryaT]

I'll simply remind everyone on 'your side' that you may have logic but no cash. You literally have no leverage of any kind . You can try to launder money, and while a few people may succeed, you'll be walking around with IT's crosshairs on you all the time, and that'll cost you business every day when your competitors have no such worries. ESPECIALLY when GST comes around. Good luck trying to convince upstream and downstream business colleagues to operate in black under GST - to take a haircut on THEIR credits to benefit you, and increase THEIR taxes to benefit you. That'll work out pretty well...

No point in going back and forth but one thing to clarify. I have no personal bone in the game. There is a lot of reference to me (you) in your post. What I say is based on observations. As for GST, yes it will help curb black money more due to it subsuming all other indirect taxes and streamlining tax administration. Will there still be an entire supply chain that will work outside of GST, you bet.

[Bart S]

These laundering mechanisms are common enough for even folks like MS Alhuwalia to remark in public.
Watch after 28:20

Yep, we can count on MS Alhuwalia the UPA appointee who was booted out as soon as the UPA lost power and who was a key part of the economic debacle of UPA 1 and 2, to not have any vested interest and present a fair picture on a policy decision of the Modi government. On an interview with Karan Thapar no less.

[hanumadu]

http://timesofindia.indiatimes.com/indi ... 675983.cms

Almost 500 maoists surrendered this month after demonetization unable to launder their money. This should be an indication that it is not easy to launder money.

[symontk]

Suraj gaaru, i was thinking that for the scheme to be successful the amount deposited+exchanged shouldnt exceed 8 L crores? Now if everything comes back to the banks barring 1-2L crore, would that help our clamp on BM, given everything is white and there was no BM to start with

There are 6LC in deposits across the co-operative banks in the country, Kerala alone having 1LC. If 8LC is already in, I dont think there is any more coming in. BM amount seems to very less unless what co-operative bank is the BM which is what GoI is indicating. But that decision of GoI will impact not just Kerala / WB even Gujarat

[hanumadu]

Suraj gaaru, i was thinking that for the scheme to be successful the amount deposited+exchanged shouldnt exceed 8 L crores? Now if everything comes back to the banks barring 1-2L crore, would that help our clamp on BM, given everything is white and there was no BM to start with

There are 6LC in deposits across the co-operative banks in the country, Kerala alone having 1LC. If 8LC is already in, I dont think there is any more coming in. BM amount seems to very less unless what co-operative bank is the BM which is what GoI is indicating. But that decision of GoI will impact not just Kerala / WB even Gujarat

Would that 6 lakh crore be held in cash only? How much of it is after Nov 8?

[hanumadu]

I think the govt is deliberately restricting new supply of 100s and smaller bills. Modi asked for 50 days and he is going to take full advantage of those fifty days. He will compel people towards electronic payments.

[Suraj]

No point in going back and forth but one thing to clarify. I have no personal bone in the game. There is a lot of reference to me (you) in your post. What I say is based on observations. As for GST, yes it will help curb black money more due to it subsuming all other indirect taxes and streamlining tax administration. Will there still be an entire supply chain that will work outside of GST, you bet.

Of course there will be. There are people posting here asserting they intend to break the law by making black money, heck that it's their 'right' to do so, while making up justifications for it. It's fine, they can justify all they want while they sit on stacks of toilet paper.

I should also clarify my you doesn't target you specifically. It's a general reference to your position. I don't think there's anything to debate simply because the debate phase is over. Those who intend to work in BM, are currently sitting on collectively lakhs of crores of wealth suddenly turned into toilet paper overnight.

The process of conversion to white economy is so far along already, that every single criticism and argument against the move is no longer sensible. 60% of cash is already back in the system. By this weekend, probably 70-75% . It's so far along, so quickly, that it's baffling anyone wants to waste time in a policy discussion. The debate made sense until Nov 8 when people could actually argue why they wanted to transact in BM, and they had wealth. Today though, it makes no sense.

As to arguments about political feasbility and costs, look at the data! 8.11 lakh crore (>60% of total) already in the bank. The worst part is over, and the government is nowhere near in political trouble. It's the opposition who cannot even muster a sad excuse for a bandh. Despite all the talk of ATMs non functional , incredible amounts of money has been deposited , exchanged or withdrawn.

Future non-compliance is a given. There are people even here who think theft through BM is ok because there's a bigger thief elsewhere, ignoring the cost they place on everyone else. Public policy motive is all about making compliance easier than non-compliance. GST is effective because it makes people dependent on each other to make things cheap for them, and anyone cheating plays a zero sum game against someone else, which means the other person has no reason to permit it to happen.

Building a new parallel economy from scratch when no big ticket transaction can be done using cash, is a cost such people will bear. GoI just needs to make that cost larger than the cost of compliance.

[saip]

What would be the use of this? Might prevent counterfeiting (but then again, ordinary folks don't walk around with RFID readers, and it is possible to clone the signals from RFID chips and make duplicates as well - RFID only makes sense if each one is encoded with a unique ID that is somehow verifiable). But sure as hell wont stop black money, might actually aid it by helping to validate people's BM stashes.

And unlike the bullshit that was circulating on whatsapp claims, it isn't possible to read any such signals except in very close proximity. So isn't useful to locate stuff either.

RFID chips can have a 128 bit number which can be made unique and the number is so big I do not know what it is called. Yes, common citizens do not have RFID readers but banks can have and they can be linked to common database. If a coke machine can have the reader so can an ATM and the common citizens can easily verify if the note is fake. RFID chips can be Write Once and Read Many Times. It will definitely prevent fake notes and our friendly neighbor can not send the 'Freedom fighters' with wads of these if he can not fake them. I am sure people will be wary of keeping lots of these notes with them knowing the Govt can 'Modify' them anytime they want.

[Karthik S]

http://timesofindia.indiatimes.com/indi ... 675983.cms

Almost 500 maoists surrendered this month after demonetization unable to launder their money. This should be an indication that it is not easy to launder money.

OT, but how are these people rehabilitated ? How does the government see to it that they are acclimated to the society.

[arshyam]

Is it just me? Why is most of rona-dhona about unavailability of small change coming only from the it-vity capital of India., Bengaluru, Kerala?

Well, here is a counter example, from the same BLR, KL .

Over the past week, I took Suraj-san's advice and I made it a point to spend my 100 notes where possible. I had relatives visiting, so had avenues to spend anyway.
- Autos: took many trips, paid with 50s and 100s. No problem in getting change back. In fact, one guy asked if I have a 5 so he could return a 10 rupee note. Told him to keep it.
- Vegetables: made it a point to shop at the local vegetable market, paid only cash in hundreds. Again, no problem of change.
- Eating at 'sagar' restaurants, tea/coffee, etc.: same thing.
- Indane LPG: paid with cash and the delivery guy returned change down to the exact rupee. Though I think this should move online - will need to check.
- Cabs: Only here am I using wallets like Ola money. None of the cab guys expressed a need for cash and were okay with e-payments. I do carry some cash in case they need for petrol, etc.
- BMTC: No issues with change - the conductor was issuing change like usual as no one used denominations over 100. Not sure what the situation is on the A/C services.

So far, no issues. Of course, I don't have any 2k notes to break, so let's see.

For the domestic help, I am paying by cash this month on purpose - it will help her tide over immediate expenses and the 100s will be very useful right now. From next month, will be shifting to cheque as she has a bank a/c and is okay with cheques.

Oh, and on almost every auto/cab ride, the driver himself starts talking about demo for some reason . General senti is that things are difficult in the immediate term, but is good for the nation. Full support to Modi.

[shiv]

Suraj gaaru, i was thinking that for the scheme to be successful the amount deposited+exchanged shouldnt exceed 8 L crores? Now if everything comes back to the banks barring 1-2L crore, would that help our clamp on BM, given everything is white and there was no BM to start with

Or there were several lakh crores of fake notes that remain unaccounted for taking the total in pre-monetization circulation to 20 lakh crores?

[UlanBatori]

http://timesofindia.indiatimes.com/indi ... 675983.cms
Almost 500 maoists surrendered this month after demonetization unable to launder their money. This should be an indication that it is not easy to launder money.

OT, but how are these people rehabilitated ? How does the government see to it that they are acclimated to the society.

These einsteins could not figure out how to hijack a truck bringing new notes? Pathetic. Even the highway robbers are lazy low-class no-goods these days.

[yensoy]

Suraj gaaru, i was thinking that for the scheme to be successful the amount deposited+exchanged shouldnt exceed 8 L crores? Now if everything comes back to the banks barring 1-2L crore, would that help our clamp on BM, given everything is white and there was no BM to start with

Or there were several lakh crores of fake notes that remain unaccounted for taking the total in pre-monetization circulation to 20 lakh crores?

I doubt there was so much fake money (as a percentage) to begin with. Also it will be very interesting to see how many fakes were detected & rejected by banks during this exercise, and how many were detected by RBI as they got handed in by banks.

[ShauryaT]

Suraj gaaru, i was thinking that for the scheme to be successful the amount deposited+exchanged shouldnt exceed 8 L crores? Now if everything comes back to the banks barring 1-2L crore, would that help our clamp on BM, given everything is white and there was no BM to start with

Or there were several lakh crores of fake notes that remain unaccounted for taking the total in pre-monetization circulation to 20 lakh crores?

One NIA report claims fake notes to be about 400 crores only.
http://timesofindia.indiatimes.com/indi ... 214965.cms

[Neshant]

Most countries in the west is already 90% cashless. People hardly carry cash. It is not a problem at all.

The aim of the western banksters is to force all their countrymen to keep their earnings & savings as digital credits - which banksters can then steal at will.

Cash puts a floor on negative interest rates being implemented to steal from savers, wage earners, pensioners and taxpayers. Removal of cash enables negative interest rates which is a transfer of wealth from those who've earned their money to banking thieves.

Again its not something you will easily understand unless you understand how the monetary system works - which you don't.

It will suffice to say that ANY attempt to force people to transact and save in a monetary system involuntarily is a robbery scheme.

You can pay all your capital goods (cars, tv, refrigirator,) property, utilities, holidays, clothes, fuel etc by card/bank transfer. No problem at all.You need some cash for vegitables and smaller purchases of very small sums. I say, keep the RS 100 rupee note only.

Sorry to say but your understanding of how control over the fiat monetary system by private banks is used to defraud the productive populace is very lacking. Do you know how and why the Federal Reserve came into existence. Do you know who's interest it represents. Do you know why the IRS came into existence at the same time the Fed came into existence? If you don't, you cannot hope to understand ANYTHING of the fiat monetary system and moves to separate the productive population from its wealth.

[Marten]

Does the Govt. gain even when say 80-90% of BM is converted using whatever means to White?

What makes more sense - having deposits on hand/money in circulation or dead cash in the system as BM?
PS: Do ALL of your posts have to point out everybody else has a bad understanding of <insert fave topic>? You are a proper match for our evergreen fave Super Comprehension Man. Hat tip to you, Sir.

[shiv]

Or there were several lakh crores of fake notes that remain unaccounted for taking the total in pre-monetization circulation to 20 lakh crores?

One NIA report claims fake notes to be about 400 crores only.
http://timesofindia.indiatimes.com/indi ... 214965.cms

That is the figure that was quoted even in that Karan Thapar video that I regret watching. I feel a visceral repulsion when I hear that man talk. I was merely saying that if, instead of 17 lakh crores, 20 lakh crores comes into the banks. Then we can expect that at least 3 lakh crores were fake. So it was a hypothetical scenario.

What I find fascinating is the way people who view demonetization through different lenses, like the blind men of Hindoostan put a different spin on it. In that Karan Thapar video that revolting catamite in a bowtie has the theme of balancing any gain of demonetization against the "pain felt by the people" and the fact that it is all going to fail because of the very reasons you have been at pains to point out on this forum.

I find this balancing of pain with gain very interesting. Pain is unquantifiable in the individual and impossible to quantify among 1.2 billion except indirectly. So the theme of pain versus gain is a political statement that seeks make a political point. I am fine with that because I seek to make a political point myself.

Until now the one aspect of demonetization that has not gained traction in public discourse is the fact that it could have bigger political consequences than financial consequences. Why?

• 1. Counterfeit currency from Pak is rendered useless leading to a sudden crisis for the Kashmir violence sponsors
  2. Naxals are suddenly coming out of the woodwork hungry
  3. Every political party is now short of funds for "rent a crowd" - the elephant in the room that is visible via the absence of widespread rioting despite the severe pain that the catamite/hijra talks about
  4. What is worse? There is every EVERY possibility that the BJP itself has sent silent word around about Modis seriousness regarding Black Money and a huge percentage of BJP cadre may simply have converted their black to white in the 2015-16 period.

To me these seem to be the biggest causes of angst and every one of these is political. Demonetization is an economic tactic which could possibly end up being a political masterstroke. It is that latter possibility that causes the most distress - the idea that Muslim murderer fascist Modi will gain political capital from this. That is what every opponent hopes to thwart by constantly howling about people's pain people's pain people pain.

Yes there is pain, but for pain to translate into political gain for Modis' opponents we need to see riots, bandhs and demonstrations. But anyone who organizes a riot/bandh demonstration against demonetization will instantly be labelled a black money supporter. Catch 22.

It is astounding to see the number of people who have their knickers in such a big twist that there is nothing that they would like to see more than a continuation of the black economy and a failure of the Indian economy just so that they can say "Modi was wrong"

Psychologically fascinating stuff

[Neshant]

Note I'm not against the elimination of BM attained through corruption.
I am against the creation of an even bigger robbery scheme setup under the guise of "eliminating BM".
If BM from corruption is bad, then institutionalized robbery through the fraud of private banks insisting on control over the earnings & savings of people is worse. If the former is BM, the latter is super-BM.

But do you even understand the above? If the answer is no, there is no point discussing it any further.

The assumption is that govt will control the digital currency and that control will not gravitate into the hands of private banksters. The history of how central banks (aka proxies for private banks) came into existence in the western world suggest that is the EXACT mechanism through which illegal & monopolistic control over society is attained by banksters.

Once private banksters gain control over the nation's monetary system and people have no exit from it, the people are little more than serfs.

Under all circumstances, the people who earn the wealth should choose the monetary system. Not "wise men" at the top claiming to be acting in the best interest of the people by forcing them to hand over control of their wealth to banksters as custodians. That is the objective of govt (and soon bankster) controlled digital currencies launched under the guise of preventing crime when in fact its objective is crime.

[shiv]

Do you know how and why the Federal Reserve came into existence. Do you know who's interest it represents. Do you know why the IRS came into existence at the same time the Fed came into existence? If you don't, you cannot hope to understand ANYTHING of the fiat monetary system and moves to separate the productive population from its wealth.

Let me make your day. Go on. tell us. I know nothing. I think that my money is safe in the bank and is paying me interest to boot.

[shiv]

Under all circumstances, the people who earn the wealth should choose the monetary system.

That is exactly what is happening in India already. Why do you feel it is different?

In which country exactly do people who earn the wealth cede control of the monetary system to someone else?