Demonetization- The Sensible and Senseless Way

What was the necessity for the secrecy and suddenness of the demonetization?

Would it have been better to have announced it well in advance, prepare banks and ATMs to avoid the chaos now seen everywhere?

The latter would certainly be far better if the objective were to flush out black money.

By announcing in advance and giving sufficient time the black money-holder would become complacent.

She / he would deposit her / his black money. One could watch large volume and frequent transactions to zero in on those with black money.

What then is the purpose of the secrecy, the suddenness and the speech by the PM.

Is there any other explanation other than to derive political mileage from the hype surrounding the move and to show the PM as one fighting black money?

Unfortunately, this is a boomerang that will come back to hurt the charlatan-advisers to the PM who are misleading him (perhaps?).

Instead of all this hullaballoo, why do not the black money crusaders just look at what is happening right under their noses?

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Tweedle Dee & Tweedle Dum of Black Money

As far as black money goes the two major parties are like the “Alice in Wonderland” characters, Tweedle Dee and Tweedle Dum. One cannot distinguish between them.

The present president promised to take action against those holding black money accounts abroad. So did the present prime minister.

Chidambaram as finance minister, came up with the “brilliant” idea of taxing withdrawals from savings accounts. He backed out due to public opposition.

Then came the Delhi High Court order holding both BJP and Congress guilty of FCRA violation in receiving donations from foreign companies.

Instead of taking the rap, the present government has amended the FCRA to treat these companies as Indian and justifying it (can you believe this?) as boosting CSR spending!

Now come the current bolt from the blue, ostensibly to curb black money.

Just as UID / "Aadhaar" is justified as meant to help the poor receive their dues, demonetization too is justified as needed to flush out black money.

Both solutions are arrived at without any thinking at all.

More on this later.

Here are links to new on FCRA  



Midnight Massacre of Innocents in the Name of Black Money - Demonitisation

The stupidity of the decision to demonitise is matched only by the foolishness of its secrecy, timing and implementation. 

If black money is in ₹ 500 and ₹ 1000 notes, what sense does it make to issue ₹ 2000 notes?

Paytm takes out full-page advertisements to congratulate “on taking boldest decision in the financial history of independent India”. Paytm is justifiably happy at the prospect of making hay – the sun is shining for their business.

What Paytm does not say is that demonetisation was tried twice earlier, once before and once after independence – both failures.

What would one call a person or country or organisation who does not learn from experience? Bismarck said, “Fools learn from experience”.

“Short-term hiccup, long-term positive” screams a headline. As Keynes said, “In the long-term, we are all dead”.

Another headline trumpets, “A New Lee Kuan Yew is Born in India: Govt Source.” Sycophancy is our speciality; we need not import it from Singapore. We “Make in India”.

The mind that made this decision is the same that thinks, UID / "Aadhaar" would eliminate theft of BPL rations and prevent leakage of LPG subsidies by cash transfers.

What was the need for secrecy and a midnight announcement if the notes could be exchanged up to 30 Dec 2016?

Creating panic was perhaps, necessary element of the chest-thumping that accompanied the announcement.

No one – none of the “experts”, the business houses – said that the vast proportion of black money is in the form of real estate, foreign accounts, in stocks and shares and in gold and diamonds.

The “surgical strike” on black money is identical to the one on the LOC, just 2 KM from the border!

No one asked why the rule that depositing more that ₹ 50,000 requires PAN number and info on source of money.

How did Madhu Koda, former Jharkhand CM could take out ₹ 4,000 Crores? How did a large part of it go outside the country? He was arrested in 2009 and is out on bail since 2013. Perhaps, the lack of judges is the reason!

Ironically, the “hawala” market was the one that became most active by the midnight announcement. The margins were a roaring 30 %. The “surgical strike” at black money spurred brisk business in hawala!  

To tackle black money first clean up political donations. Then make political parties to declare the amount and source of ALL funds they receive.

Does India's “Lee Kuan Yew” have the courage to do this?




Jan Dhan - Inclusion or Fraud Facilitator?

Hailed as one that would lead to financial inclusion, Jan Dhan has become a device that facilitates fraud. 

Financial inclusion cannot come from allowing accounts to be opened in the name of the poor. It can only come from job creation and enabling poor to earn income with dignity, generate hope among the poor that their progeny would acquire learning and skills to come out of poverty. 

Here's a link to an article in 'Money Life' that describes a typical scam using Jan Dhan accounts.