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Backing off would be allowing the circulation of old currency notes.

Raising the daily withdrawal limit (for ATM) from 2k... (more)

fwuser12 (Nov. 13, 2016 @ 3:26p) |

1. My uneducated guess is that this measure effectively forces people to bring most of their cash to the formal banking ... (more)

FW10001 (Nov. 17, 2016 @ 12:35a) |

Don't forger this is India, so more physical gold will be hoarded for a next few years till the memory of this note conf... (more)

neophyte (Nov. 17, 2016 @ 1:20p) |

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similar to the US $20.

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rufflesinc said:   similar to the US $20.
Hmnnn...never heard of $20 being withdrawn suddenly like this. AFAIK they added counterfeit measures gradually.

However there might be similar fate of $100 bill.
Why $100 Bills and €500 Notes May Soon Be Killed Off

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Largest paper is now worth something like a buck-fitty, I understand

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Will the 100 rupee note be the biggest denomination then? That would mean lost of currency notes to carry for transactions in a country where (legitimate) cash transactions are common, even for big amounts.

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fwuser12 said:   Will the 100 rupee note be the biggest denomination then? That would mean lost of currency notes to carry for transactions in a country where (legitimate) cash transactions are common, even for big amounts.
They are introducing new 500 and 2000 rupee notes but large cash transactions are mostly done to avoid tax. Black market economy is estimated to be 20% of GDP in India.

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marcopolomle said:   
fwuser12 said:   Will the 100 rupee note be the biggest denomination then? That would mean lost of currency notes to carry for transactions in a country where (legitimate) cash transactions are common, even for big amounts.
They are introducing new 500 and 2000 rupee notes but large cash transactions are mostly done to avoid tax. Black market economy is estimated to be 20% of GDP in India.

  That number is probably way under reported. 

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This has caused mayhem for the tourists and pretty much for the most of the country. Hopefully things will settle down in a week. It was really funny that some enterprising thugs were purchasing refundable plane tickets in hopes of converting to new money later. Government retroactively blocked that loophole as well. I suspect everything will be great until the con artists find out a way to circulate new fakes.

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one analyst claimed it would hurt builders and home prices??

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Anyone else see the irony in 'fighting corruption' from those who use forcibly monopolize the currency market?

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funny thing is this just resets the cycle.... once the new 2000 notes come out, slowly the black money train will restart. the smart corrupt ones would already have converted cash to gold/dollars/euros long time back. This will help definitely but still not root it out.

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I imagine from now till the end of exchange millions of peasants, city paupers and just relatives will be bused between banks and post offices, each given 4,000 Rp to exchange at every location for a small kickback

Or, for bigger fish - bribe the official, fight corruption-fighters with corruption

Overall I'm very disappointed, I expected Modi to be smarter. This is old exchange/confiscation trick, used many times in Soviet Union, not very effective and very disruptive for a free-market economy.

Fight against corruption is a long an arduous one, and cavalry's attack is not a straightest path to the victory.

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prastogi2012 said:   funny thing is this just resets the cycle.... once the new 2000 notes come out, slowly the black money train will restart. the smart corrupt ones would already have converted cash to gold/dollars/euros long time back. This will help definitely but still not root it out.
funny? lol, it just aint about resetting the cycle. it's about getting all the money back (to banks), and penalty to 20-30% of whom gave few million-billion rs 
Pakistan sources mentioning about printing fake indina currency to back terrorism, BTW that money is WORTHLESS now


of course, people converted it to gold/dollars/euros. etc
but it's not about targeting people, it's about bringing back the black money.
targeting people comes after getting black money to nation.


 

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neophyte said:   I imagine from now till the end of exchange millions of peasants, city paupers and just relatives will be bused between banks and post offices, each given 4,000 Rp to exchange at every location for a small kickback

Or, for bigger fish - bribe the official, fight corruption-fighters with corruption

Overall I'm very disappointed, I expected Modi to be smarter. This is old exchange/confiscation trick, used many times in Soviet Union, not very effective and very disruptive for a free-market economy.

Fight against corruption is a long an arduous one, and cavalry's attack is not a straightest path to the victory.

  he dint pronounce his victory yet.
this is one of the starting point, like the surgical strikes in pakistan.
seems like u r stuck with 500s and 1Ks bills, lol

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prastogi2012 said:   funny thing is this just resets the cycle.... once the new 2000 notes come out, slowly the black money train will restart. the smart corrupt ones would already have converted cash to gold/dollars/euros long time back. This will help definitely but still not root it out.
  The new 2000 and 500 Rupee bills (notes) will have digital tracking system, so people cannot hide them under their mattresses, or anywhere else for that matter.  

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needhelpplease said:   one analyst claimed it would hurt builders and home prices??
  Yes, at least for a short period of time.

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Wow India is backwards!

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brettdoyle said:   Wow India is backwards!
and we have proven our forwardness by electing Trump.

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love4money said:     The new 2000 and 500 Rupee bills (notes) will have digital tracking system, so people cannot hide them under their mattresses, or anywhere else for that matter.  
  
Hoax

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prastogi2012 said:   funny thing is this just resets the cycle.... once the new 2000 notes come out, slowly the black money train will restart. the smart corrupt ones would already have converted cash to gold/dollars/euros long time back. This will help definitely but still not root it out.
  
This was pretty much under wraps until the last moment from what is written so most cash hoarders got taken by surprise 

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It has NOTHING to do with fake money, it's an attempt (if inept) to fight corruption and tax avoidance.

Read the facts:
http://www.bbc.com/news/world-asia-india-37947029
http://www.bbc.com/news/world-asia-india-37961975

However, it plunged the entire country in disarray for weeks, it will have affect on GDP too.
For Americans - imagine tomorrow morning debit and credit cards will stop working, and the highest legal tender is $20 note

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neophyte said:   It has NOTHING to do with fake money, it's an attempt (if inept) to fight corruption and tax avoidance.

Read the facts:
http://www.bbc.com/news/world-asia-india-37947029 
http://www.bbc.com/news/world-asia-india-37961975 

However, it plunged the entire country in disarray for weeks, it will have affect on GDP too.
For Americans - imagine tomorrow morning debit and credit cards will stop working, and the highest legal tender is $20 note

  Huh? It was announced just four days ago! Entire country in disarray for weeks??  

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neophyte said:   It has NOTHING to do with fake money, it's an attempt (if inept) to fight corruption and tax avoidance.

Read the facts:
http://www.bbc.com/news/world-asia-india-37947029 
http://www.bbc.com/news/world-asia-india-37961975 

However, it plunged the entire country in disarray for weeks, it will have affect on GDP too.
For Americans - imagine tomorrow morning debit and credit cards will stop working, and the highest legal tender is $20 note

  
That is a bad analogy. Correct one would be 'Imagine taking $100 notes out of circulation in USA.  You can go the bank and exchange for newer currency. But you can do only say $2K".  The idea is, only people that will have hundreds of thousands of dollars in $100 bills may be the ones that avoided taxes (like Mafia).  You can if you have proof of paid taxes can exchange any amount.  I see logic in what happened in India. 

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vkva said:   
neophyte said:   It has NOTHING to do with fake money, it's an attempt (if inept) to fight corruption and tax avoidance.

Read the facts:
http://www.bbc.com/news/world-asia-india-37947029 
http://www.bbc.com/news/world-asia-india-37961975 

However, it plunged the entire country in disarray for weeks, it will have affect on GDP too.
For Americans - imagine tomorrow morning debit and credit cards will stop working, and the highest legal tender is $20 note

  
That is a bad analogy. Correct one would be 'Imagine taking $100 notes out of circulation in USA.  You can go the bank and exchange for newer currency. But you can do only say $2K".  The idea is, only people that will have hundreds of thousands of dollars in $100 bills may be the ones that avoided taxes (like Mafia).  You can if you have proof of paid taxes can exchange any amount.  I see logic in what happened in India. 

Your "correct" analogy is out of scale by about factor of 50

If you remove $100 note in US - US is only about 30% cash economy - you affect 1-2% of savings and 1-2% of daily cash circulation, and at most 5% of population

In India they removed all notes above US $7, India is 85% cash economy, and notes removed were constituting 80%+ of total money in circulation

You see logic in what happened in India only because you're seating on the high pole 100 yards above

Btw, Indian government is staring to back off already:
India raises withdrawal limit as rupee anger mounts 
"Prime Minister Narendra Modi acknowledged the "pain" being experienced by millions but said the scheme was "not born from arrogance"."This hardship is only for 50 days," he said in a speech in Goa on Sunday. "Please, 50 days, just give me 50 days. After 30 December, I promise to show you the India that you have always wished for."
 

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neophyte said:   Btw, Indian government is staring to back off already:
India raises withdrawal limit as rupee anger mounts 
"Prime Minister Narendra Modi acknowledged the "pain" being experienced by millions but said the scheme was "not born from arrogance"."This hardship is only for 50 days," he said in a speech in Goa on Sunday. "Please, 50 days, just give me 50 days. After 30 December, I promise to show you the India that you have always wished for."
 

Backing off would be allowing the circulation of old currency notes.

Raising the daily withdrawal limit (for ATM) from 2k to 2.5k and from banks (20k weekly to 24k weekly) is not backing off. The original plan contained a timeline to increase the limits and this is just accelerating it. The limits were placed to avoid hoarding and ensure the new currency notes go into circulation in a more orderly manner and there are no shortages. Increase the limits just shows that perhaps this is working.
 

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1. My uneducated guess is that this measure effectively forces people to bring most of their cash to the formal banking system. Improves bank balance sheets, allows more lending, more write offs of bad debt (connected industrialists and politicians make merry on those write offs).
2. The big cats don't lose much, since their black money (tax evasion, bribes, etc) is already in overseas accounts, land, gold and other assets.
3. The mid-level hoarders of money, and everyone below them, get shaken down and submit most of their INR 500 and INR 1000 holdings to the banks. Which means some of that money can then flow, as in all capitalistic societies, from the poor to the rich (see 1 above).

Any benefits from this measure might last a few years, or just months. The pain to the small guy on the street might be excessive compared to the temporary benefits from the demonetization.
Again, I am not an expert.

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Don't forger this is India, so more physical gold will be hoarded for a next few years till the memory of this note confiscation is still fresh; agree with FW10001 - effect will be fleeting as any one-time measure of non-economical nature

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