Notes on demonetization and note ban in India

08 Nov 2016

Existing notes cancelled. The temples will see surge in donation. Coin collectors will njoy the opportunity. If stock markets crash buy the stocks over next week’s,esp banks,auto,fmcg,skip reality,infra. This move has so called Rss imprints. Like him or not. This is gutsy move. CA and income tax dept will be in news. A lot i guess. Also note its effect on real estate and election process…..but no serious politician keeps cash lies in real estate and stocks….Ah yes the bank holiday the classic bank holiday is seen in our lifetime.. rejoice economics student’s..
Rip Keynes, this is classic Austrian school revenge

09 Nov 2016

Very very few can understand destruction of capital , black is the ethical label to otherwise valid and authentic money. Its is not always criminal in general sense of common man.
We have to see how people dispose the unconvertible black currency notes. Either govt will have re launch amnesty scheme or it will have to bear the destruction of capital which is plain deflationary ! Given that inflation in india is already tamed this move can potentially shock gdp growth number. Which why probably govt has preponed budget dates so it could compensate fiscally.i dont know if velocity of money will be a problem, it wouldn’t be i believe as its a more bank note swap and not currency launch so its a monetary irritant but people’s reaction is what economics makes hence the mention. 3 to 6 months is long period, we have to see whose capital gets wiped, hope the govt did the math’s here, it had the data btw.
. … beyond the surface diagust for black money we need to understand that it is also mark of govt inefficiency (in addition to private greed etc). And also realize that even if black, it contributes to economy . Remember services of which real estate is big part is half of gdp, its not that magically India became 2 trillion economy under chidambaram.
Only that all of the black money might not formally get accounted in gdp..hence black.
..the last man in the black money chain looses the money …what we don’t know is what happens to his obligation and how it will affect those in obligation chain ?

12 Nov 2016

Big F… read till last line….A typical ATM has four cassettes in it. Each cassette holds 22 packets of notes. Each packet has 100 notes in it.
Now, with most dispensing Rs 100 notes, the maximum each ATM will hold is Rs 8.8 lakh.
Assuming each person going into an ATM draws to the upper limit of Rs 2000, that makes it 20 notes. That in turn means each ATM can handle a maximum of 440 transactions per day.
..Every human being has panic.. economics is all about human emotional reaction

13 Nov 2016

Deflation. Do u know that word? You are going to hear it all of 2017 and hopefully not beyond. But more than reading. We will all experience it firsthand…good bad and ulgy side of deflation
….caused by this 500 rs move…why? Destruction of capital… ….If your economics news author or stock analyst. Is not talking of either of this.. consider changing your reading sources.
Ps: deflation sounds good in theory like Ayurveda likes purging. But it need strong guts to stomach it (oh there is pun btw.. unintended)…
In short. We will bleed first and recover later
now…post 2007 on the ground economy was slowing but govt printed electronic money…how do explain that to suffering public but with new confusing term stagflation…but u see the voting public was in deflation of wealth and thus purchasing power. And it revolted.. that only explains new decisive leaders getting elected. what Indian govt did is not destroy this new cash supply which is lying as Npa and asset on balance sheets. But they further eroded wealth with common man…u see black money is first money and then black…now the public faith in money and banks is shaken subtely…it will take long time of it returns. And public makes the economy. The proverbial velocity…that is going to take long time..that’s how destruction of capital….
I wud have favored balance sheet cleaning before cash squeeze….but it done. So the cold depressing deflation is here…ppl won’t buy.. market will shrink
…indians love gold already. They will love even more for years to come. Note ka bharosa nahi..
govt liability to pay the note will not come down. So long the notes exist…but people’s claim on wealth suffers…capital is destroyed…and deficit is diff phenomenon.. unconnected to cash supply..
Govt balance sheet wont improve…with this move. No way

20 Nov 2016

Look at the fun, bank have sudden surge in deposit and this interest liability-outgo, whereas their main business is taking cut out of the flow. They are stuck. The deposit money will also be stuck, people who lost balck money but deposited white in bank,basically marginally corrupt folks will be very frugal with deposit. People with major black have their capital wiped out, this majority will cause depression in market, scaring even the pure white folks n marginal black money holders. Banks will have curious problem of lending
The big corps are still licking wounds of over investment and have better rates internationally available. It will b pr disaster if banks try to woo them. The retail guys will hesitate to buy home in falling market. This leaves only make in India kind of sme sector, but u know how tough it is to build a globally competitive sme. This is classic deflation of velocity of money slowing. I see rates go down to 7% or so for deposit n home loan. At the same time the consumer goods won’t slide so much, they can’t as Indian mind is allergic to falling income while they love cheap good. So commerce will be in funny doldrums. Only once a time lapse of a year or so is over the usual activity of consumption lead demand will trigger the gains. Its might be more than a year or less if govt announces some housing incentive, which will be risky tough.
The banks might find to keep balance sheet neat but not via common man type landing. We have a big problem dec the falling auto,cement sales will start appearing in news. that will kick off the bewilderment cycle. Capital destruction is risky it had reset the economic cycle in manufacturing and service economy while the agrarian part will thankfully keep normally going on
Market is on whitened money ..but the retail reality will catch up soon…when the results start pouring jan…pe wont be justified no matter what. But u see the salried middle class will have its revenge…we havnt heard of negative DA after al

24 Nov 2016

The troll of manmohan singh, and not de demonetization is the turning point for modi era…mark the event and keep observing… finally congress seem to have learned how to stand up to aggressive bjp…god bless the democratic balance in India.
urjit ..rajan contrast is like mms modi..we need to get used to change of style i guess
Shanktikant das as RBI official is talking to media..why insist on his boss ?i also believe the daily rules are coming from. Fin min and.not RBI…RBI is policy. Fin mind is procedures and rules
…inr is back in the short India territory of 2012… everyone know this is the time rbi cannot intervene in i believe we need to digest it for some time. But you see fundamentally demonetization is positive for inr…a currency base erosion is equal to informal revaluation of inr. I am assuming rbi wudnt show them as gains hence reevaluation think we need to give Patel more time. This demonetization move is too big for a guvnr. Nifty is in pain for sure …the jan results will be bad..even the monthly data will be bad..we will have a yearly gdp rate of 4 pc or less..not that 4 is bad number if economy is cleansed. But the shock will be absolute coz then onwards it will be even less of gdp growth…ppl don’t get economics
You see the unconverted notes simply vanish…if rbi doesn’t print in lieu of them. Which i believe they wont then there is reduction in currency base..that’s revaluation of inr. The funds are taking advantage of liquidity squeeze by shorting inr.
even when rajan came we said hez gs stooge and world bank spy….this time its amabni for patel…the govnr is bound to have a resume….rajan was media savy but thats abberation…we cnay judge patel like that.. his real test is what he does on monetary front when 30 dec comes and again when gst comes….if he takes drastic rate cuts..i wud give him full mark. Say 7 % rate

25 Nov 2016

One your away…7.5 home loan rate…gdp growth rate of 6..5..4 % q on q…a real estate panic…and hopefully a zero DA for govt employees..between now and Diwali. It will be puncher-ed by gst rollout and stock market down slides till gst rollout. No mass unemployment like ppl r saying

26 Nov 2016

Deposit rates are down to 7% range..these are leading or lagging gdp rate by 2 to 3 %gap as per the cycle…but loan rates have 3% gap still ! now that fds are down, gold is next, auto loans, and then home loan all converge to 7 and low as the slowing economy numbers get publicized. These numbers will mean a lot to our daily lives comfort and troubles. B prepared .ps: as it stands demonetization is appreciative for inr in months as range.
There will be deflation plain and simple..painful, but we will get out.. population growth