What India Did – Other Countries Will Do – BEWARE

This is the boldest move by any government in recent times. Both the old 500 Rs and 1000 Rs notes have been ‘probabilistically devalued’ meaning that anyone holding large number of notes, the value just has been significantly lowered by approximately 10 to 20% overnight. If you now try to deposit the cash, the money is devalued so in other words you were just taxed up to 90%. This is all claimed to attack the underground economy or black money and corruption.
To understand this bold attempt, let us assume that the ECM 100 and 500 notes are demonetized overnight. The government can ensure that this money is deposited or converted in banks and thus it then becomes your obligation to prove you paid your taxes. They will compare the sum with an individual’s income tax obligations.

This post was published at Armstrong Economics on Nov 18, 2016.