Non-motoring > This is why fiat currency is useless! Miscellaneous
Thread Author: movilogo Replies: 15
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New Thu 10 Nov 16 14:39 
 This is why fiat currency is useless! - movilogo
www.bbc.co.uk/news/business-37919292

All of a sudden, Indian govt. declared that ₹ 500 and ₹ 1000 notes are no longer legal tender!

I have few such notes with me (it is legal for anyone to carry up to ₹ 10,000 outside India for personal expenditure at airports, taxi etc. when returning back) and I have no plan to visit India by December 2016 (after this date these notes would become toilet papers).

So unless I can find someone to carry these notes physically to India before next months, I stand to lose a couple of hundred pounds equivalent :(

I am not alone in this situation though.
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New Thu 10 Nov 16 14:58 
 This is why fiat currency is useless! - sooty123
Can't you change them at the post office?
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New Thu 10 Nov 16 14:58 
 This is why fiat currency is useless! - smokie
Indian banks have branches over here don't they? ICICI does, for one, though their branches are only around London. I suppose it depends what the notes are worth as to how far you travel...

1000 is worth about £11 today according to xe, how many ya got?
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New Thu 10 Nov 16 15:01 
 This is why fiat currency is useless! - movilogo
No! First of all very few countries outside India exchange Indian currencies. After this annoucement even Indian banks all over the world refused to accept these notes anymore.

Also, "Indian banks" outside India are regulated by countries where they operate and not by India.

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New Thu 10 Nov 16 15:20 
 This is why fiat currency is useless! - sooty123
>> No! First of all very few countries outside India exchange Indian currencies.

Very strange so you have to buy it all in country? Is there anyone you know going out there soon? If not try putting them on ebay someone will buy them who's due to go there soon.
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New Thu 10 Nov 16 15:36 
 This is why fiat currency is useless! - BrianByPass
Until Tuesday, you could buy/sell at major UK banks and at bureau such as Best Foreign Exchange and Moneycorp. Apparently, they won't touch any amount of rupees now.

Friend arrived in Delhi late Tuesday evening, had taken £100 worth (approx Rs10,000) cash for taxis and tips. He has found that no one will take his Rs500 notes, not taxi drivers, not the hotel, nor any shops . The company he was visiting also refused to break the notes in to smaller denominations. Apparently, some of their junior staff are paid in cash and had asked the company to hold savings in cash for them in the company safe. Their money is now in limbo. As the BBC article linked above says, they can change a maximum of 4,000 rupees at the bank but then it also says there is no limit!

Apparently he may be able to exchange 4,000 at the airport if he can prove how/where he got the cash.

My friend is going to bring the cash back and hope that the bureau here will buy it back from him.
Last edited by: BrianByPass on Thu 10 Nov 16 at 15:38
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New Thu 10 Nov 16 16:45 
 This is why fiat currency is useless! - movilogo
Those who are traveling to India are bombarded with requests from friends and relatives. Every Indian origin person has few thousand rupees in those denominations.
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New Mon 14 Nov 16 16:02 
 This is why fiat currency is useless! - Mapmaker
>> Every Indian origin person has few thousand rupees in those denominations.

So it seems like quite a sensible policy to me...
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New Mon 14 Nov 16 17:13 
 This is why fiat currency is useless! - BrianByPass
>> >> Every Indian origin person
>>
Every? - just a little bit of an exaggeration?

>> has few thousand rupees in those denominations.
>>
So worth only a few tens of GBP

>> So it seems like quite a sensible policy to me...
>>
Of the people of Indian origin I know, only those who travel regularly to India keep a little bit of Indian currency on them in case cash is needed on arrival. Some take GBP notes instead and swap for Rupeess using unofficial traders (in other words, money launderers) who give an uplift on official exchange rates.

Strangely, one reason given for cancelling these £10 and £5 worth notes was to make counterfeiting unattractive. But that argument doesn't stand when the largest new note denomination is Rs 2000 (worth £20).

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New Mon 14 Nov 16 17:41 
 This is why fiat currency is useless! - Cliff Pope
>> But that argument doesn't stand when the largest new note denomination is Rs
>> 2000 (worth £20).
>>
>>
Perhaps the new notes are more difficult to counterfeit, like our own new plastic notes?
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New Mon 14 Nov 16 17:47 
 This is why fiat currency is useless! - CGNorwich
Surely it's nothing to do wiht counterfeiting. It is all to do wiht the black economy. Much of India's commerce is done on a cash basis and is invisible to the taxman. By forcing people to deposit cash in a bank account and with draw new denomination notes the government is able to get a handle on the true wealth of individual and tax them accordingly.

Quite a smart move really although it does bring inconvenience to some
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New Mon 14 Nov 16 18:24 
 This is why fiat currency is useless! - sooty123
Since the OP started this thread i did a bit of reading on the BBC news about it. It'll interesting to see how many people can actually get to a bank to deposit the money? I don't think that this is the first or second time either, but the third time they've tried something like this. Third time a charm ?
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New Tue 15 Nov 16 17:05 
 This is why fiat currency is useless! - Roger.
Fractional reserve banking is worse. The ultimate Ponzi scheme. OK, it runs while confidence is good, but one day..............................................................
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New Wed 16 Nov 16 10:51 
 This is why fiat currency is useless! - Cliff Pope
>> I don't think that this is the first or second
>> time either, but the third time they've tried something like this. Third time a charm
>> ?
>>

Surely black marketeers will simply turn to some other kind of money that the government doesn't have control over?
Gold, cigarettes, diamonds, US dollars, parmesan cheese, ration vouchers, milk quotas, have all been used in their day.
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New Wed 16 Nov 16 10:57 
 This is why fiat currency is useless! - sooty123
Surely black marketeers will simply turn to some other kind of money that the government doesn't have control over? Gold, cigarettes, diamonds, US dollars, parmesan cheese, ration vouchers, milk quotas, have all been used in their day.
>>

Well I'm surely they'll be at least partial successful, whether it's worth it or not will be for India to judge. This time I believe that jewellery has shot up in popularity, there are also reports of people burning bag fulls of money.
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New Wed 16 Nov 16 11:12 
 This is why fiat currency is useless! - movilogo
The aim of this initiative to counteract:

1. Fake currency circulation (Indian govt. claimed Pakistan is printing more Indian fake currency than their own currency)

2. To prevent bribing by cash (this is a social issue and I don't think it can be irradicated completely in near future)

3. Huge amount of "black" money by big businesses/political parties/mafias etc. who kept in form of cash. Many are indeed burning huge stash of old currency to avoid detection.

Converting black money to white is not easy as such. Buying property will leave a trail because govt. can question owner where he got money to buy from. Indian property transactions are often conducted in partial white money and rest in black money. Thus, the official sold price is much less than actual price buyer paid.

More people will now look for gold (in fact Indians collectively own largest amount of gold compared to any other country) but strong gold has different logistical issues (e.g. detection by metal detector etc.)

The thriving Hawala (en.wikipedia.org/wiki/Hawala ) model is also uncertain now.

Recently Indian govt. announced that there could be some provision for overseas Indians but no detailed plan yet.
Last edited by: VxFan on Wed 16 Nov 16 at 12:54
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