Chaos as India eliminates two largest banknotes without warning

[Mr. Bill]

What did they do there or what area did they go to ? I find it an interesting country

They don't like for me to share their personal info online.

[DrJohn]

According to the Daily Bell, there is a rumor that India will ban the private importation of Gold.

http://www.thedailybell.com/news-analysis/india-bans-cash-now-gold/

[Smurf Hunter]

According to the Daily Bell, there is a rumor that India will ban the private importation of Gold.

http://www.thedailybell.com/news-analysis/india-bans-cash-now-gold/

As I work with many folks from and in India, I expect many requests low volume smuggling for upcoming travel.

[David in MN]

According to the Daily Bell, there is a rumor that India will ban the private importation of Gold.

http://www.thedailybell.com/news-analysis/india-bans-cash-now-gold/

Always a good sign.

[osubuckeye4]

According to the Daily Bell, there is a rumor that India will ban the private importation of Gold.

http://www.thedailybell.com/news-analysis/india-bans-cash-now-gold/

[mgw44]

ok, lets think a little.  So the US treasury mints gold and silver coins.  If the United States wanted to get rid of the higher value bills why do they still actively mint coins out of precious metals?

This event is another reason to diversify your wealth and income streams.

mgw44

[iam4liberty]

The $500, $1000, $5000 and $10000 US notes were eliminated in1969.  This preceded Nixon's closure of gold convertability.  it ensured that even financial institutions wouldn't have sizable assets in liquid form to covert before the window closed.  Instead of notes that could be redeemed under law the large transactions were changed into ledger entries.

[David in MN]

ok, lets think a little.  So the US treasury mints gold and silver coins.  If the United States wanted to get rid of the higher value bills why do they still actively mint coins out of precious metals?

This event is another reason to diversify your wealth and income streams.

mgw44

It's because the number of dollars in circulation (M3) is controlled by the Fed and minting of coins is controlled by the Treasury. The Treasury could mint a $20,000,000,000,000 coin, declare it legal tender, give it to the Fed for cash, and be debt free in an instant. Proof?

http://www.forbes.com/sites/kotlikoff/2013/01/19/the-treasury-has-already-minted-two-trillion-dollar-coins/#6165ec8c246e

Now that would have maybe a slight effect on inflation.. Cough. Maybe. But that's one of the economic outs in the good old US.

[bigbear]

Apparently the demonetization policies aren't working out that well for India...   

This is the best article.
http://economictimes.indiatimes.com/news/economy/indicators/50-days-of-demonetisation-how-indian-economy-went-off-the-rails-and-what-the-future-looks-like/articleshow/56250380.cms

For a pro-demonetization take
http://www.businesstoday.in/current/economy-politics/every-rupee-will-have-a-trail-says-pm-in-his-first-interview-post-note-ban/story/243257.html

For an anti-demonetization take
http://www.firstpost.com/india/demonetisation-was-single-biggest-case-of-total-mismanagement-says-chidambaram-3181450.html

[Morning Sunshine]

Apparently the demonetization policies aren't working out that well for India...   

thanks for the update.  was wondering last week

[Canadian Prepper]

That's provided for some interesting reading.

Incidentally, I had just been chatting with my mother last night about how people managed in Europe at the war's end once their money became worthless.  Rural farmers couldn't go into the city to purchase supplies, but city people had to go out to the country and barter their personal belongings for barely enough food to subsist upon. The situation probably lasted for at least several months if not for a year or two before the new currency was established.

Whatever the real reasons, India's demonitization policy is significantly different from the currency collapse of a post war, bombed out and occupied country, but it goes to show that things needn't necessarily be that far fetched before the government can step in and mess around with peoples' savings and plans.

[Mr. Bill]

Thanks, bigbear.

Indian numbers for the befuddled:

• Lakh = one hundred thousand
• Crore = ten million
• Lakh crore = one trillion

[Mr. Bill]

Update:

NPR, 9/24/19: What Happens When A Country Suddenly Gets Rid Of Most Of Its Cash?

...Gabriel Chodorow-Reich is an economist at Harvard University, and he and his colleagues quickly saw demonetization as a perfect "natural experiment," a rare opportunity to look at how economic theory plays out in the real world.

You might think that Chodorow-Reich and his team could have just looked at official statistics, like GDP, to get the story. But GDP misses a lot, especially in a country like India, where there is a massive underground economy. To get around this problem, Chodorow-Reich and his colleagues used other measures, like satellite imagery of lights at night. ...

The new bills were sent to districts at different speeds and in different batches, and Chodorow-Reich says that this wasn't done with much recognition of where the old notes came from. As a result, some districts became much more starved for cash than others, and the economists used data on these cash shortfalls to measure the effect of cash on economic growth.

Chodorow-Reich and his team find the policy of rapid demonetization caused a two percentage point crash in economic growth during the first few months after the policy was announced. To put that in perspective, the Indian economy was growing just over 2 percentage points per quarter during this period. So essentially, the policy halted economic growth. ...