by tonytran2015 (Melbourne, Australia).
As a money sovereign, the Indian goverment issues its own fiat money (which has values only by. acceptance by the issuing goverment to pay its tax, fines and to buy government supplied properties and service).
Now the same goverment declares that the money in high denomination (80% of issued money) will expire at the end of the year 2016.
1. The justification of avoiding counterfeit is not acceptable as counterfeits can be detected with more care by money users. Old money notes should be orderly and gradually removed from circulation with no sudden date of demonetization.
What may happen to someone who is oversea and cannot come back in time to exchange his notes for new one?
2. Saying that high valued cash money are mostly illegal money is unacceptable.
Is the government prepared to receive all its taxes, fines and fees in small valued notes?
Poor people has no way to store their saving except using cash. Does the goverment expect them to store the saving in bulky, worn out low valued notes?
Rich people don’t need to keep high valued notes: They can buy gold, land, houses, business, oversea investments. The value of a business, its good will, is enormous and no one can assign any precise legal value to a business! Rich people will take advantage of this.
3. Fighting corruption should be principally executed by rendering government processes transparent. Corrupt officials are too clever to be caught with the simple trick of demonetization.
So all this business of demonetizarion seems like a way to make a cashless India. On the way, the government robs people of their savings but retain their debts to the powerfuls.
The lessons for the future:
1. The poor Indians have to convert their saving into goods (such as gold, food) and hoard the goods.
2. Alternatively, they may need to take the I Owe You notes from their local reputable businessmen. The local businessmen may also form a trust that owns the hoarded goods on behalf of the poors.
This may lead the people back to the finance systems of the previous few centuries.
3. The government has done it once, they will do it again. Indian people should only swap their goods into Indian money prior to time to pay taxes!
India’s cash crisis explained, BBC,