- 10th Nov 2016
Ok, I heard about the news from my dad. I thought he was talking rubbish and I googled "500 rupees india" and OMG !!! it was true. PM Modi-ji had just declared all 500 and 1000 rupees to be invalid starting midnight. I was like WOW, thats pretty bold and RIP black money.
I started following the news more closely and here's a compilation of thoughts.
Side note: 24-hour Indian news channel have so much redundant content.
- 17th Nov 2016
Here's why I think this move is still awesome:
- 500/1000s contribute to 86% of all the Indian cash notes and it was demonetized on a single night, single stroke, no warning, no nothing. Any money you have in cash form is now invalid. You CANNOT hoard your cash savings anymore. Never been done before !!
- For the first time ever, the government has forced the entire cash to flow via bank & other govt agencies within a small time window. The government has placed itself in the middle of all your transactions.
- Rs 2k Daily limit on cash conversions to different denominations. Fantastic !! With the daily limit and 50 time-frame and long wait times in banks, you can only convert so much back to cash.
- Rs. 2k X 50 days X 2-3 conversion/day = 3L Rs
- Even you have employ 100s of cheap human labor, you can convert only in 1-2Cr into cash.
If you are a hoarder, you are forced to deposit your cash into bank accounts. - With introduction of daily/weekly withdrawal limits (Rs. 25k/week for individual, Rs.50k/week every for businesses of any size), people are forced to start some spending cashless for all their purchases, same applies for businesses/professionals like lawyers, advocates, etc, buying property, etc. Everything charged in cash, will deflate. People just don't have the money to pay you even if they want to.
- Since there's a lot of withdrawals and most of Indian economy is mostly cash-driven, Bank reserves are going to stay high at least a some time until the people withdraw all the money 1 week at a time. More reserves = Low loan interest rates !!
- Banks/Credit cards are going become more involved in small & big transactions like buying in property, etc. A booming time for Indian banks, credit providers, e-wallets like PayTM or PayPal, etc.
- Cheaper commodity & lower interest rates, economic boom !!
- Criminals printing fake notes or hoarding fake notes are done(for now). More money removed from circulation and more deflation.
There's are so much tactics the clever hoarders can are doing that I would like collect them as well.
- A lot of naive hoarders just discarded all their cash into garbage.
- Fake act of charity. Don't throw, put money into temple hundials, beggars, etc :)
- Put money into trust funds or charity organizations you control and take it back with this issues are resolved.
- Adjust the books to mark all your black money as legally earned.
- On the night of announcement, People were buying lots of gold from the jewelry stores and petrol bunks.
- Pre-pay all your employees for the next year with a bonus.
Naive/Poor employees take the cash :( - Mutual help between business-men(man-to-man help), pre-pay all contracts, business in advance with a high profit margin
- Open bank accounts on all your family members, employees, friends and deposit 2.5L, WITHOUT their knowledge. I probably have a couple of bank accounts being opened without consent.
- Give money with consent to friends & poor people and offer a small cut.
- Shark lenders are offloading their black money into the poor people in the form of at a low interest rate shark-loans. Poor people take the money without understanding the implications of waiting in long queues for days and still have to pay the money back(whether or not they are able to convert it in the banks).
More to come.
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