[civic-sense]

Demonetization might be a failure for many, but not for all. One, I do not believe that all cash came back to the system. It might be true that all black money was not in cash. But at least 10% of all cash was in black money, and that did not come back.

Then how do you explain the money that (allegedly) came back? They didn't. They just substituted it with new cash, but not through banks. It was a scam well executed.

[Sawyer]

Sorry, I don't get it. What scam and who executed it? How?

[hserus]

Originally Posted by civic-sense

Demonetization might be a failure for many, but not for all. One, I do not believe that all cash came back to the system. It might be true that all black money was not in cash. But at least 10% of all cash was in black money, and that did not come back.

Then how do you explain the money that (allegedly) came back? They didn't. They just substituted it with new cash, but not through banks. It was a scam well executed.

The RBI doesn't have figures yet they say. But initial figures make it likely that - after figuring out the costs incurred by RBI, the banks etc, there's actually more cash deposited into the banks than was ever estimated to exist.

In any case the confident expectation people had of a windfall of 25..30% of cash just disappearing and representing extinguished / written off debt, or thrown into the Jumna river as some memes had it, is a mere pipe dream.

Even Jagdish Bhagwati and Vivek Dehejia - two of the most vocal proponents of Demonetization - have started to hedge their bets. https://theprint.in/2017/09/05/prema...ccess-failure/

More from Sadanand Dhume here - https://www.aei.org/publication/the-...good-politics/

[avira_tk]

Originally Posted by civic-sense

Demonetization might be a failure for many, but not for all. One, I do not believe that all cash came back to the system. It might be true that all black money was not in cash. But at least 10% of all cash was in black money, and that did not come back.

Then how do you explain the money that (allegedly) came back? They didn't. They just substituted it with new cash, but not through banks. It was a scam well executed.

It deals only with cash and 99% of it is back, how did you get the 10% figure? If you're on about wealth, then this move has nothing to do with it, real assets are not affected in any way.

The rich and powerful got their notes exchanged while everyone else thought "the rich" were getting it in the neck. Anyone has a picture of a politician standing in a queue to exchange notes? The notes came through the banks, who else was distributing it?

Jealousy is a powerful tool to turn people against each other. What a coincidence that the anniversary of the day one of the worst governments was born falls on the same day, a century later.

[civic-sense]

99% is the official version. When did we start believing govt versions? 90% is my estimate. The difference was printed and used for funding elections. Forgot all the new currency that was seized during the days when we were standing in queues?

[sachinpk]

Originally Posted by avira_tk

It deals only with cash and 99% of it is back, how did you get the 10% figure? If you're on about wealth, then this move has nothing to do with it, real assets are not affected in any way.

Sir, some thing does not add up here. Three statements which I hear often.
1. All unaccounted black money has reached the banks. Nobody burnt their ill-gotten wealth or burnt forged currency notes.
2. The economy is in a big mess, many people have lost their jobs (and nothing has improved 12 months down the line).
3. The banks are now forced to pay interest on the large volume of money sitting in their accounts.

When I try to make sense of all the above together, I am confused.
1. If all the money reached the bank (and they also left the bank properly audited and accounted), then the people who had deposited them would be just carrying on with their business, am I right. They may curse GoI, but by this time - 12 months - would have got their money back and carried on with their life. They would have already started making the next chunk of unaccounted money.
2. If Demonetisation was just a cumbersome excercise of making queues at bank only to put in and take back the money held by each individual, that would not have led to any job loss on a perennial basis. Yes, many poor people did spend their time in queues for many days, and may have lost their daily wage in that process. But now it has been 12 months, and by now every one would have got all their money in the new currency. Which also means nothing stops people from employing other people and every one getting back their jobs. Why should any one stop spending, just because they had to put all their money in a bank and get it back in new notes?
3. The bankers would be crying hoarse by now, as their burdens are increasing now. Earlier they had huge NPI, and now they have to pay interest on the huge money deposited with them. I don't hear such cries, and I also understand that a few banks have reduced home loan & vehicle loan interests. Banks seems to be eager to loan out money now.

So looks like what has happened is only part of Step #1 listed above. That is every one had to deposit all their money (liquid cash) in the bank. But have they been given back to the account holders? For the average joe out there, yes. But for people who have not shown the source of income, their accounts are still being scrutinised. Many big time tax evaders may also have paid up the huge fine, and got what ever remained (so that they can at least survive). Lot of people who did not pay any tax earlier, now have to plan their budget for tax payments as well. Job losses only happen when the employers for some reason are not able to continue to provide the jobs. In this case the only reason for job losses is that the job loser's employer is now having a cash crunch (mainly because his cash is in the bank, awaiting some good clarifications from him).

For the true result of De.Mo; people may find it believable only when they see the other wise "rich people" now begging on the streets, or being seen hand cuffed and taken to a court/police station. Both these may not happen, because of the existing laws and the provisions to pay penalty and come out. The people who paid the penalty would never admit that as well (in a shame-based society like what we have in India). On the other hand, business shutting down and the poorer people losing their jobs would be more visible, and would certainly cause sadness/worry in the people.

[avira_tk]

Originally Posted by sachinpk

Sir, some thing does not add up here. Three statements which I hear often.
1. All unaccounted black money has reached the banks. Nobody burnt their ill-gotten wealth or burnt forged currency notes.
2. The economy is in a big mess, many people have lost their jobs (and nothing has improved 12 months down the line).
3. The banks are now forced to pay interest on the large volume of money sitting in their accounts.

When I try to make sense of all the above together, I am confused.
1. If all the money reached the bank...
They would have already started making the next chunk of unaccounted money.
2. If Demonetisation was just a cumbersome excercise of making queues at bank only to put in and take back the money held by each individual, that would not have led to any job loss on a perennial basis. Yes, many poor people did spend their time in queues for many days, and may have lost their daily wage in that process. But now it has been 12 months, and by now every one would have got all their money in the new currency. Which also means nothing stops people from employing other people and every one getting back their jobs. Why should any one stop spending, just because they had to put all their money in a bank and get it back in new notes?
3. The bankers would be crying hoarse by now, as their burdens are increasing now. Earlier they had huge NPI, and now they have to pay interest on the huge money deposited with them. I don't hear such cries, and I also understand that a few banks have reduced home loan & vehicle loan interests. Banks seems to be eager to loan out money now.

So looks like what has.. In this case the only reason for job losses is that the job loser's employer is now having a cash crunch (mainly because his cash is in the bank, awaiting some good clarifications from him).

For the true result of De.Mo; people may find it believable only when they see... would be more visible, and would certainly cause sadness/worry in the people.

1. The money didn't stay in the bank, it was exchanged, that's why we had cases like that 6 crores seizure in new notes, in December itself with one individual.
2. Capital acquisition comes about with millions of small transactions, when spending is reduced by 85%, every business will be hit, that too around the peak spending season. Poor people didn't stand in queue, they didn't have money to spare for that, they just lost wages and got deeper into debt. Salaries and wages are a completely different cup of tea. The wages are paid in cash to reduce transaction costs, people who make a lakh a year in seasonal occupations don't waste time at the bank.
3. The RBI has put 100% crr on those deposits, the banks are earning interest while RBI is losing money. The banks are also hoping for rates to fall so that they can book a profit and wipe off the bad loans. The saver is shafted and the crooks get to keep their assets. New legislation is in the works to remove depository insurance, keeping money in the bank will be a real gamble then.

There is absolutely no incredible rise (it just follows an upward trend as seen from previous years ) in either tax filers. The raids on the wealthy that are reported include value of jewellery, real cash is back in a big way just a case of people keeping costs down.

Job losses happen when the employer has no money to pay for his employees because business has ground to a halt. Money in the bank is irrelevant. Inventory costs will wipe you out.

Infrastructure first, not ideals, that's how you bring about a change in habits. Banks are not places where daily wage labourers feel welcome, even in rural areas, the less said about urban banks the better.

[ritz3645]

Like Bull and bear at stock market, every field / vertical / Industry / bureaucracy, also have forces. If too much water flows on one side, in some time their will surely be an entrepreneur / force, who will take opportunity of the situation, to balance it. I will call it a natural phenomenal.
The society we live in, is a live ecosystem. One should study it closely. People became successfull by finding or providing the balance.

No two days are the same. Another example is this statement 'Do what you love'. What I decipher it as, there will good times and bad times, but if you like it, the ride becomes smooth. This statement is with reference to Business community especially since their life is never static, every incident can become a opportunity, some to hammer competitors out by being better than before.
Demonetization was an event, to test the survival skills and we all surely came out more agile, after this event, and it is for the survival skills for future.

[sachinpk]

Originally Posted by avira_tk

1. The money didn't stay in the bank, it was exchanged, that's why we had cases like that 6 crores seizure in new notes, in December itself with one individual.

Okay. So are saying that 100% of money was exchanged? I mean every single chappie out there who had unaccounted money, managed to collude with the bank officials and got it converted to the "new currency"? You are mentioning about seizures, which implies when such events did happen, they were also getting caught. Assuming that all such people who had unaccounted money managed to "launder" that into new currency, ideally they should be able to continue with their existing business. For example a builder who had 100cr of unaccounted cash, gets its laundered. He would continue to be in real estate business (this time with true blue new currency notes). Then how come we see a crash/crunch in that sector? I feel we are taking a few examples and stating that every single black money holder, managed to launder every single rupee worth of black money, every single time he tried it. That may not be true. If this was true, why should people say that economy is not going good?

Capital acquisition comes about with millions of small transactions, when spending is reduced by 85%, every business will be hit, that too around the peak spending season.

People had to less spending capabilities because their liquid cash were all getting hauled to the bank. We say it was a "peak season" because it came just before Deepavali 2017. Now we just saw Deepavali 2018 go past. People who who wanted to go on a shopping spree, would have continued to do that. They had nearly 12 months to plan for it. And we also say that every person who had black money had managed to launder it. They could have very well gone on a shopping spree this time around. So if this time around, there was no great spending (or no great business) in the peak season; it is only because there was no much unaccounted cash floating around. What is happening is that a group of businessmen - jewelers (for eg.) who had 1 crore of business (90% of which was done using unaccounted/untaxed wealth) this year around did not get the same 1 crore worth of business. Small time buyers, with genuine interest/demand would still have made some purchases (using fully accounted money). For the jeweler how ever, the business is not doing good. For the small time gold purchaser, it does not make much difference. He wanted a few gold ornaments, which he managed to get any ways.

The raids on the wealthy that are reported include value of jewellery, real cash is back in a big way just a case of people keeping costs down.

The bolded part also means that this real cash is also getting invested in some area, as per my understanding. But at the same time we are also saying economy is now in a mess. So where is this real cash going now? And if people are keeping the costs down, why should they do that? What benefit do they get? Or are they hoarding the money (in new currency)? Then it would be like the case which a prominent minister in KA is facing today.

Job losses happen when the employer has no money to pay for his employees because business has ground to a halt.

Why did the business get grounded to a halt? I am not a business man, so excuse me. Why did a specific businessman land up in a situation where he could not pay the salaries of his employees. Either he was playing a real high stake game (big time risk taker), or he had an unaccounted "cash pool" by which he was hoping to pay his employees. In my area, the only shop which remained closed for 2-3 months was a shady mobile shop which only dealt with "money exchange" & "only cash" kind of deals. Other than that, petty shop keepers, medium sized super markets, hotels etc. all seems to have been on full working mode.

As I see it; before DeMo there was lots of "cash" flying around. It could be fake currency note, it could be genuine ones. People who managed to get any type of such notes, scored big time. You had "cash", the world was yours. There was no incentive for any one to really be accountable to any government agency. You had the RTO official (using his unaccounted bribe money - in cash)->buying gold (unaccounted by the jeweler, who again gets richer)->buying big property (using unaccounted money, which again goes unaccounted to the real estate owner/builder). There was real big business in India which purely existed on "unaccounted transactions" (for big value money), which also gave an impression that the economy was doing good. But it was a case of "tax evaders" doing business with other "tax evaders", with "tax evaders" earning more money at the end of the transaction. A win-win story for every tax-evading chappie out there.

De.Mo changed that. "Cash" is now limited, tough to have in lots of quantities, and GoI now having a fair idea of net worth of each and every individual. "Unaccounted transactions" may now have happen at a very small level, but big time players are getting busted.

[giri1.8]

Originally Posted by mayankk

And that was THE most beneficial outcome? Wow!!
We are a petty nation, agreed, but this takes it to another level altogether!
(I dont subscribe to that view, though. )

Who doesn't like it, when people who skip all the pleasures of life to work hard and make it big, ends up standing with common man.

On a serious not, I am a middle class guy myself, but this whole idea of thinking rich people don't deserve better life is really worrying!

[ritz3645]

The article by HT with source.

One year after demonetisation: These 11 charts show how it affected Indian economy

Source :
http://m.hindustantimes.com/business...TZW89FOzL.html

[Sawyer]

Originally Posted by avira_tk

Infrastructure first, not ideals, that's how you bring about a change in habits.

Absolutely. Change the environment that creates the need for black wealth generation. Or at least punish those responsible for creating this environment with at least as much vigour and energy as you are expending in harassing the ones that are only responding to the environment you have created. And in harassing the much much larger number of those that haven't the luxury of being able to so respond. Very little of the former action or even intent is visible or even admitted.

No State has the moral right to assume all citizens are guilty until proven innocent - not even one that is not corrupt itself.

[hserus]

Originally Posted by ritz3645

The article by HT with source.

One year after demonetisation: These 11 charts show how it affected Indian economy

Source :
http://m.hindustantimes.com/business...TZW89FOzL.html

Realty sector still reeling? Certainly picking up to some extent and by the way black is back. My relative is selling a small apartment and wants to sell it all white, he got more than one offer just yesterday to register the flat at 75% of the actual value and take the rest in cash.

He didn’t go through with that, being a honest sort of chap, but as you can see such old habits have returned just fine and now it is easier to hoard cash thanks to 2k notes. (Something which rather surprised Thaler when he was told about it after praising the removal of 1k and 500 notes).

Moreover it is a matter of scale, a $500 note is a quite large sum in the USA and has far more purchasing power than what a 500 rupee note has in India (e.g. try to buy groceries with rs 500 at a Nilgiris in Chennai and $500 at a Safeway in San Jose) so eliminating comparatively lower valued notes in high circulation wasn’t possibly the best idea ever. It’s like if the USA had made hundred dollar bills illegal.

[vishnurp99]

Originally Posted by Samurai

Here is something I wrote last December:
As I feared, they kept increasing the cash supply and we are back to square one.

Hi Samurai -
I have found some of your posts on economics quite insightful. However I don't think you are entirely accurate here. From all indications we are at 90% of our cash value in circulation level pre-demonetisation. Also note that we have been adding approx 15% of currency every year for the last few years.

The total value of all notes is given below for 3 years in lakh crores -

March 14 - 12.8
March 15 - 14.3 (up 13.5%)
March 16 - 16.4 (up 15%)
Nov 4 2016 - 17.97 (up 8.75% in 7 months)

Let's assume that there was no demonetization. This is what the cash situation would have looked like. These are conservative estimates since the velocity of cash usage was increasing towards the later months of 2016.

March 17 - 18.86 (assuming an uptick of 15%)
Nov 8 17 - 20.51 Lakh crore (Assuming an uptick of 8.75%)

What is the actual situation today?
We have 16.35 lakh crores in circulation which means - 4.15+ lakh crore of currency circulation has reduced. This is approx. 20% of the cash in circulation today.

All, Please let me know if you see any fallacy in the numbers or the flow of reasoning.

[hserus]

Originally Posted by vishnurp99

We have 16.35 lakh crores in circulation which means - 4.15+ lakh crore of currency circulation has reduced. This is approx. 20% of the cash in circulation today.

My guess is that a lot of the reduction in circulation is because people are building their cash resources back up, and there was a certain amount of loss in the exchange process (give your black old cash to a broker, he will take a commission and refund you some amount in new notes).

Amounts that got exchanged this way will likely remain in cash form except exchanged to new notes.

You know things get back to normal when all the small momo shops etc that used to take paytm gradually abandon it and go right back to taking cash, people start getting offers for used cars / second sales flats in part cash etc. And that is already happening.