[Samurai]

Originally Posted by Sawyer

This quote was in response to my statement that it is not illegal even today to accept the demonetised notes, for the reasons I have said so many times here, without any rebuttal from anyone based on existing laws and rules. In fact, every time I have asked to be told about exactly how it is illegal, by quoting a section from a law or a rule made under a law, there has been a thunderous silence.

Nice use of oxymoron. Returning to reading this thread after a long time. Unlike you, most of us here are not lawyers. Obviously we won't be able to quote laws and regulations. Most of us here were going by the government directive that "From Midnight Nov 8, 2016, Rs500 and Rs1000 notes are no longer legal tender". Which means businesses and people can refuse to accept them as payment. Whether they must not accept, that is debatable. I am no legal eagle. So I looked up for any gazette notification of new regulation on Nov 8th.

It is very clear old 500/1000 bills are not legal tender. The new regulation was published via an extraordinary gazette on 8th nov.

They have spelled out the kind of businesses that have exemptions during the period of Nov 9th to Nov 11th (extended in later gazette). And in the last line, they have said that all establishments that are exempted must maintain complete account of record of stock and sale of transactions made with the specified bank notes during the period.

I am no lawyer, but does that mean everybody else can accept old notes merrily without having to maintain any records until Dec 31st?

Originally Posted by Sawyer

I have not found any report that led to the current demonetisation; the one on the Ministry of Finance website is from 2012 and has no reference at all to demonetisation as a useful step against black money. I am starting to think that the current step has been taken by a very small group of people, thinking that they know best. Which does not necessarily mean that they are not correct, but the odds aren't looking good to me

Why do you need an old report to tell you whether the demonetization is useful? A good understanding of economics/finance, without the political bias to blind us, is enough.

First you need to understand why currencies exist. They have only one purpose, to enable transactions. Prior to electronic transactions, all currencies were physical. Physical currencies have one weakness. They have no intrinsic value, but a value guaranteed by the central brank (RBI) of the country.

Why is this a weakness?

A currency bill is like a cheque given by RBI without expiry date. Imagine being in that situation, say you gave away 100 cheques without expiry date. You have to always be wary and keep your liquidity in the account for those cheques to be presented. If you don't, those cheques will bounce when presented, that will breach the trust in all the outstanding cheques. But they may never come back, so you have to maintain liquidity forever.

Now why is this a problem?

Because it interferes with the money supply. RBI controls the money supply according to the GDP of the nation. It needs to increase or decrease money supply according to demand. If India is producing an item which is highly in demand around the world (say software/diamond/textile), the demand for Indian rupee would rise in order to purchase the said item. In such case, RBI would increase the money supply to keep the rupee value steady. If the demand for Indian goods drop, the demand for rupee will drop. In such case, RBI would decrease the money supply to keep the rupee value steady. This brings us to the next question, why should rupee value be kept steady? That is because volatile currency is very bad for business. Absolute value of a currency is of no consequence, but their stability in short term is very important. If you make a contract, and the rupee value changes before the money is paid according to the contract, one of the party will be a loser. For this reason, many do currency forward contracts, if the currency is volatile.

How does black market affect control of money supply?

RBI cannot control what it has given out. If a huge amount of cash is circulating outside of banking system, RBI cannot reduce the money supply when needed.

So the idea is to reduce the money held/transacted in cash. Now they have forced all 1000/500 bills (cheques) to expire. In future they will severely limit the number of high value bills (500/2000), so as to avoid the same situation. That will force people to use electronic means in future for large transactions. That is what this demonetization is supposed to achieve.

[carwatcher]

This article is as true as many others floating around. I don't see that all the people withdrawing all the money the deposited even after the ban due to :

A) Housewives depositing pin-money upto 2.5 Lac won't withdraw the whole amount as they may feel if they had deposited it in their personal account its safer in the bank rather than at home if the family members are aware about it now.

B) If stored in other notes than 2000/500 storage also be a problem.

C) Many people who would be using banking for first time would also feel its not worth to again withdraw all the money and keep it at home when they can use ATM.

Originally Posted by GrammarNazi

Hi guys, Is this article true or false :

https://www.newslaundry.com/2016/11/...demonetisation

I also personally feel that the timing is almost perfect if Govt brings in Judicial and Police reforms by way of heavy financial penalty as an option for compounding of corruption crimes so that the complainant feels inclined to report such crimes and the offender feels that its not worth the risk anymore just like heavy penalties for ticketless travel in trains. But I don't see any realistic chances of any Govt doing that. If any Govt does that I would be the first to salute them.

[binand]

Originally Posted by GrammarNazi

Hi guys, Is this article true or false :

https://www.newslaundry.com/2016/11/...demonetisation

It has many assumptions, but none as egregious as that there is a 1:1 value replacement of demonetized notes planned (ie, new notes of combined value Rs. 15 trillion is needed). On the contrary, I suspect the government wouldn't do that, instead would reduce the value of currency in circulation. One should remember that as a result of the present exercise, many individuals, vendors and body corporates have shifted to electronic payments, reducing the hard cash demand in the country.

A second assumption that is not tenable is that even if a 1:1 replacement is planned, all of that will be replaced withing 50 days (ie, 31/12). Remember that SBI alone has received deposits in excess of Rs. 2 trillion; add other banks and I won't be surprised if that number goes up to Rs. 5 trillion by end of December. They don't have to replace all of this with new notes; the easiest to understand is the fraction of this that went into FDs that don't need to be replaced immediately if at all.

The third is the assumption that all this 15 trillion in notes will be exchanged; none of it will be burnt, seized, abandoned or used as landfill. :-)

Some other assumptions that look suspect to me are (a) presses started printing only from 1/9 onwards, (b) total press capacity is only 3 billion notes a month, and (c) only way for new currency notes to diffuse into the system is via bank/post office/ATM counters.

[chakri400]

Originally Posted by 400notout

Actually 70L after selling land is pretty much loose change considering todays property prices. However we cannot excuse breaking a red light just because others do so. When caught the excuse of "sab aisa kar rahe hai" doesnt work.

I see many messages about "everybody does it"l and there is no choice. I disagree. Choice exists and am sure conscience would have called it during the decision time to take or not take black money. I know people who were certain That they wanted to buy a property only in white. They had to let go many "good" properties as seller demanded a certain portion in black. But peace of mind comes first and they stand vindicated today. I know many in my circle who didn't take the shortcut.
Let's not paint everyone with the same brush "everybody does it" as it diminishes the good that honest people did so far even during days when they could have been easily dishonest.
Time to honour the honest now, let him have his time in pride - hope it lives on!

[Sawyer]

Many excellent responses; I will take my best shot at replying. Note the exception of the nature of the first question to all the others though; I wonder why.

Originally Posted by indian21r

Why does not the government start cleaning its own house as the first step before targeting someone who is trying to survive.

I have said just this often here, and some others have said so as well, but only a minuscule majority. I expect to see this clamour grow in the country as this cataclysm fully unfolds.

Behind the right conferred by citizens to their government to collect taxes, there is a moral contract. Pay us the tax honestly, and we will use that money honestly for your benefit. It is the same contract as in my housing society for the monthly maintenance bills, and while there are occasional delays, no member cheats on his monthly dues. But from the time of independence, every government has failed to keep its side of this moral contract. The contract is therefore broken, because it takes two to keep it intact. What we are seeing now is: GOI will not make any attempt to be honest beyond optics and cosmetics, but you had better remain so, or GOI will come down on you like a ton of bricks. And I am seeing all the steps that are promised will be taken to be adding more weight and more ton to this ton of bricks. Nothing about the keeping of the other side of the contract. And it isn't about the personal honesty of one man, or otherwise. The house that is the GOI is dishonest as an exact opposite side of the coin of dishonest black money wealth. Double entry book keeping working as it does, for those that have learnt accounting, and the former dishonesty has given birth to latter.

Originally Posted by vivek95

Whoa ! Sorry sir, but what are you even trying to say here ?? Let me remind you that there is still a miniscule populace left in this world who live by honesty though there are thousands of "opportunities" day in and day out where even they could be dishonest.

Sorry to digress a bit, but answer me here if you don't mind - When you "drive" , why do you obey all the traffic rules when the rest of the world around you cares two hoots about anything ? I see you are from Pune, so let me ask you, do you stop at the red lights because you really feel there is a "great deal" about traffic signals and their purpose or just because you don't have the so called guts as other motorists around you to grab the opportune moment and jump the signal ?? If you have an equal opportunity of breaking the signal, why don't you just do it ?? I am sure, you being a BHPian, would not break a traffic rule, out of your own will, no matter what others do. Being honest in any sphere of life is on the similar lines sir, be it not hoarding black money or virtually anything else !

First of all, I accept that morally you are a superior being to what I am. I am usually honest, I confess.
That said, you have misunderstood my statement, or I have not worded it properly. It is worth a retry:

Take the case of millions of Indian that are salaried, with no other taxable income. All pay the taxes via TDS, none can claim deduction of any expenses to reduce their tax liability. At a guess, how many of these millions do you think would have still paid ALL the tax they have, if there was no TDS, no reporting of their total salary to the IT dept via Form 16 or whatever, and no real worry of being caught except in a raid? Let us, for argument's sake put that number as 1 million. A big stretch that, in my opinion, but never mind. What my statement meant is that only this 1 million can legitimately claim to be honest. The remaining cannot; it is no great thing in their case, they had no option but to be honest. I will not even comment about how many of these "honest" millions have been scrupulous about paying the last paisa of the countless indirect taxes that they have to pay on all that they buy and sell.

As to the driving on the roads example, I am glad you raised it. I have broken the red light, cautiously, but still illegally, when I was sure it was safe to do so for everyone else on the road and for me. Early morning, as an example, before the sun is up, when actually the correct way for the lights to work is as a flashing amber. So, yes, I have broken traffic rules at times and have no claim to superiority there. I also learnt my driving when it was dinned into me - NO overtaking from the left. On highways, with a truck or a slower car in the right lane, I have overtaken from the left. Similarly in city traffic as well. Over 40 years of driving on Indian roads of all kinds, with zero accidents other than being hit at the back in city traffic by out of control two wheelers and a car driver talking on his mobile phone, but completely honest - no.

As to BHPians, less said the better about the generalisation you are making; I have seen a lot of nonsense on the road from cars bearing BHP stickers. Do you want to give them the benefit of doubt like a certain actor was given and say, but they must not have been driving the car?! Being a BHPian means just that, that he/she is a BHPian; no special halo of honesty attaches by some alchemy.

Originally Posted by pramodkumar

Let's hope things happen the way government planned.

As always, it is about the only thing that we can do now; hope, and pray.

Originally Posted by msdivy

you might be aiding counterfeiters & black money hoarders convert their illegal stuff into legal tender. Once you hold this currency, the risk is passed on from them on to you.

I will take that risk if I have to, beyond what I already have when I sold my old motorcycle, as have many people whose examples I have given here, who I applaud. If I do not take money from anyone in excess of what I take from other customers, there cannot be any money laundering, or action under any law relating to money laundering. Any income tax liability would be to my account; no problem with that.

Originally Posted by Samurai

And in the last line, they have said that all establishments that are exempted must maintain complete account of record of stock and sale of transactions made with the specified bank notes during the period.I am no lawyer, but does that mean everybody else can accept old notes merrily without having to maintain any records until Dec 31st?

Why do you need an old report to tell you whether the demonetization is useful? A good understanding of economics/finance, without the political bias to blind us, is enough.

If you make a contract, and the rupee value changes before the money is paid according to the contract, one of the party will be a loser.

How does black market affect control of money supply?
RBI cannot control what it has given out. If a huge amount of cash is circulating outside of banking system, RBI cannot reduce the money supply when needed.

I don't know how to bullet quote with a post, so bear with me:
1. There is of course an implicit converse in the perfectly legal statement the GOI has made on the subject. But that is grammar and language logic; the converse has no legal support, as I have explained many many times here in previous posts. And of course, neither I, nor anyone else I have quoted as good civic minded citizens of robust common sense, are saying what you say we are saying: We will merrily accept old notes without having to maintain records. Of course we will maintain records; perhaps even more carefully than before because of the knowledge of stated to be guaranteed scrutiny by GOI.

2. The full consequences of demonetisation are not fully understood by the best of economists anywhere in the world; it is like tinkering around with weather systems isn't fully understood because it is so complex. So much lesser mortals like me have to learn from the report that being of 2012 is not really old, and is made by minds much more experienced than mine on the subject. And from other sources of experience and wisdom.

3. I absolutely agree with what you have said about sanctity of contracts. And of the consequences of breaking them. Does GOI? In the time since 1947, has it earned the moral right to break it? As it has both with the dishonest use of taxes collected, and by this demonetisation?

4. I have not read anywhere that demonetisation has been done to make sure that the ability of RBI to drive monetary policy has been weakened by black money. RBI CAN reduce the money supply even now because the black and white money are indivisibly merged into the flowing river of cash, that RBI can still effective influence. This is my assessment, I could be wrong. But, as I have said, the only person I have heard argue this issue as a reason for demonetisation - for inflation control essentially - is you. It would have been interesting to hear Raghuram Rajan's views; but he will keep his mouth shut now, he is a principled man.

PS: While I have no claim to 100% honesty as some here do, I have no black wealth, so I am not losing sleep on THAT one count. But I am as depressed as the aam admi quoted here that lost his wealth; I just hope that I get some cheer by India winning the match today.

[vibbs]

Originally Posted by chakri400

I know people who were certain That they wanted to buy a property only in white. They had to let go many "good" properties as seller demanded a certain portion in black. But peace of mind comes first and they stand vindicated today. I know many in my circle who didn't take the shortcut.

A buyer of a property, unless he already has black with him, does not gain much in paying with cash. He will save on the stamp duty yes, but then what is the percentage?

On the contrary he is converting his white into black undervaluing the property he bought and increasing his tax liability during resale, because if he does not get at least equivalent amount in black when he sells, he has a larger capital gain to deal with.

I have just bought a flat and not paid a single penny in cash. It simply does not make sense for me to do it. Matter of convenience if you ask me since this is my first apartment and I do not have any unaccounted cash sitting with me. And no moral high grounds whatso ever.

[Sawyer]

Originally Posted by vibbs

A buyer of a property, unless he already has black with him, does not gain much in paying with cash. He will save on the stamp duty yes, but then what is the percentage?

On the contrary he is converting his white into black undervaluing the property he bought and increasing his tax liability during resale, because if he does not get at least equivalent amount in black when he sells, he has a larger capital gain to deal with.

I have just bought a flat and not paid a single penny in cash. It simply does not make sense for me to do it. Matter of convenience if you ask me since this is my first apartment and I do not have any unaccounted cash sitting with me. And no moral high grounds whatso ever.

I am glad you pointed out the last part; and everyone does what seems sensible for them, just as you have done what was sensible to you. Almost no one is irrational. But morality, when faced with a visibly dishonest government that is squandering taxes merrily, struggles to survive.

Here is the dilemma people like you have faced in the past:

The builder says, that if you give me 50% in cash, I will give you the flat for Rs 100 lakhs, inclusive of VAT and all charges.

If you must pay by check, it will cost you Rs 120 lakhs all inclusive.

In the first case, the 50% cash, if taxed money, withdrawn from the bank, is white money. When given to the builder it becomes black in his hands. Does the flat become black wealth in your hands? I can't say for sure, I will have to read the stamp duty act.

The issue of resale and tax liability: if the proceeds are all invested in another single residential flat, capital gains are tax free, so it doesn't matter which option is chosen, there is no income tax evasion.

And for many middle class Indians, this may be the only flat they can afford to buy.

Do you see the dilemma?

[vibbs]

Originally Posted by Sawyer

The issue of resale and tax liability: if the proceeds are all invested in another single residential flat, capital gains are tax free, so it doesn't matter which option is chosen, there is no income tax evasion.

And for many middle class Indians, this may be the only flat they can afford to buy.

Do you see the dilemma?

What I meant is that I claim no moral high ground in purchasing a flat fully on White. It just seemed more convenient to me.

Regarding taxability, yes the proceeds if invested in a property the gains are tax free. However, what I meant is tht by undervaluing the property you are buying, you increase the proportion of Capital gains that needs to be reinvested in property only in order to save tax. Essentially for a person who pays 50 Lakhs in cash (after withdrawing it from his white sources), it means that after the resale of his flat he has a bigger portion that he needs to now necessrily invest in a single property itself to save tax.

Had he not undervalued the property while buying, he would have had more money at his disposal to invest in other avenues (or invest in multiple properties) after selling his property later on. May be a good or bad thing depending on how you look at it.

[Sawyer]

It is very illuminating these days to read good quality newspapers with an open, even skeptical mind. Most good ones carry both points of view and news of various kinds - today's Times of India is a good example.

Clear thinking unburdened by preconceived ideas and beliefs, is a very useful tool to sieve through all the content thoughtfully and arrive at more reliable conclusions than that those with closed minds will; if the mind is open, this isn't difficult to do. Particularly if one is far from the collateral damage for whatever reasons, it pays to do this. Those that are seriously damaged won't have to read any newspapers to make up their minds of course.

But the one thing that comes across forcefully is the great tragedy of our times: that the opposition has no access to the moral high ground needed to be a credible opposition because their past has rendered them so very vulnerable to be effectively counter attacked.

[sandeepmohan]

For the benefit of the group, please note that you can't exchange the new Rs. 2000 note for change. Exchange or getting change, is possible only after 11/24.

[VKumar]

Originally Posted by Oxy

What the teller does is, deposits 24k in my father's account and gives him a receipt. Then takes a photocopy of the fake note and makes him sign on it, puts a "Fake note" seal and tells him it will now go to RBI.

You must be thankful that it was just one note. Had it been 5 notes or more then not only would you have lost your money, you would've had to face the cops and their questions too. And I tell you; cops and their questions is what can traumatize any honest and decent common man, especially in such cases.

Originally Posted by carwatcher

you belong to a very very minuscule group which is cut-off from the habitation to the extent that it can be said as an exception.

What about the farmers, who are facing hardships just because the co-operative banks aren't doing any exchange? Additionally everyone knows how deep is the penetration of banking services in the rural areas.

I belong to the school of thought which believes that in this step; the government has worst hit the ones, for whom they are calling that these steps will be beneficial - the poor. Why should I venture into an unknown territory when I can see the same happening in my profession as well as my village?

Sugarcane crop has started to ripe but no labour to cut it. Sugar mills transfer the payment of sugarcane un bank accounts but that money can't be withdrawn right at the moment when farmers need it most urgently. Crops are perishable, who should be held accountable for this loss of farmers and labour class of villages who depend on these crops only?

The man who works in an office in 7 LKM (It was RCR some time back) has simply turned his back to the ones who are actually on the verge of disaster (it is, for farmers at this moment) and will be back in a month shouting on loudspeakers about the idiotic 'fasal beema yojana' to get his share of votes in the election of UP.

IMO a decision with a very short term vision it was, and if not others, at least the people like truckers, farmers, contractors, wedding stuck families etc should be given some relaxation.

The suggestion of yours that ATMs be calibrated would have taken away all the secrecy as there are Two lac ATMs and it would have taken the same work to be done again if in the first step only they were only calibrated to accommodate 2000 Rs notes to maintain secrecy.

IMO they could have made new 2000 and 500 rupees notes infused into the system and then abruptly killed the older currency, the effect would have been more or less same but with a buffer. Well that's my personal opinion and I can be wrong; nobody is perfect after all.

[sairamboko]

Went to Hdfc bank near my home for a withdrawal. Came out in 15 mins. Bankers are looking very tired and their frustration is seen but they try hard to put a smile/ normal face. They are getting circulars /notices every 30mins. Kudos to the bankers!!

On the withdrawal or exchange process, banks are very strict. For exchange Aadhar card is mandatory. For withdrawals Hdfc especially my branch was asking to do it via cheque only. Id proof is mandatory and the teller asks you to sign at the back of the cheque in his/her presence. Now most of the banks are organised and very less queues. ATMs are still a work in progress. Many of the ATMs started dispensing ₹2000 notes here in Bangalore . Hope all this demonetisation process results in some good.

[m8002?]

The ATMs have 2000s and the queues have shortened. Problem is getting change for the 2000. I tried at two places yesterday for bills of 350 and 600. Both said no change and accepted the card.
The shortage of the 100s is now what will start affecting the smaller traders who dont have machines ( like the street side vendors ). Public is also to blame to some extent because they are not releasing the 100s in the market. One guy in my team tells he has now 10K worth of 100s at home!! The whole family has been collecting 100s as much as possible.

[sgiitk]

Originally Posted by sandeepmohan

For the benefit of the group, please note that you can't exchange the new Rs. 2000 note for change. Exchange or getting change, is possible only after 11/24.

I see no such rules. It is only the cash crunch which is creating problems. Only on Saturday I bought petrol, offered a 2,000 note and got about 230 in change. Many people want to buy petrol for 200 using a 2000 note. This is what creates issues.My thumb rule is that if your purchase is over 1000 then the 2000 should be acceptable.

I have heard of people going with a 1000 rupee note to a chemist, and buying a strip of Crocin.

[jpcoolguy]

Originally Posted by Sawyer

But from the time of independence, every government has failed to keep its side of this moral contract. The contract is therefore broken, because it takes two to keep it intact. What we are seeing now is: GOI will not make any attempt to be honest beyond optics and cosmetics, but you had better remain so, or GOI will come down on you like a ton of bricks. And I am seeing all the steps that are promised will be taken to be adding more weight and more ton to this ton of bricks. Nothing about the keeping of the other side of the contract. And it isn't about the personal honesty of one man, or otherwise. The house that is the GOI is dishonest as an exact opposite side of the coin of dishonest black money wealth. Double entry book keeping working as it does, for those that have learnt accounting, and the former dishonesty has given birth to latter.

Can this be considered as a first attempt at doing this?

http://zeenews.india.com/personal-fi...s_1951697.html