India’s Botched War on Cash | Hacker News Reader

India’s Botched War on Cash

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11 pointsfirasd7 comments

Yet 90% of my social circle (middle-upper class India) is in strong favor of this seemingly terrible move by Modi government. It is not unlike the support Duterte has seen in Philippines.

I think schadenfreude and Utopian promises (especially from a leader they already support) have a strong grip on people. At this point though the pro-demonetization rhetoric in India is running out of steam. First it was going to be a 'surgical strike on black money' that would end corruption and terrorism, so you had to stand in bank queues for your country the way soldiers stand at the border; then it was about 'going cashless' and digital payments; by now it's clear that the main thing that's needed is to print new notes as quickly as possible.

Almost everyone who was rich and corrupt on 7 November 2016 will still be rich and corrupt an year later.

Why don't Indians continue to use the 1000 rupee notes? They can still be used so long as they are not forged or totally damaged and people are still willing to accept them. If there is trust they can be used just like bitcoin. A group of entrepreneurs can create a database of 1000 rupee notes and their owners just like normal banks and destroy them afterwards if they so wish. All the owners have to do is to make transfers between the accounts and they should be fine. So long as there is trust and reliability what could go wrong, and how would that differ from Bitcoin?

What stops people from creating a Bitcoin type currency based on unwanted 1000 rupee notes?

By the way isn't the amount of 1000 rupee notes in circulation exceed the total value of all Bitcoins creatable?

Because without it being a legal tender it is just paper. Are you thinking it will at least be a standard looking paper with unique serial number? That is plausible, but then there is no one to check/enforce counterfeit notes which will flood the system.

The term legal tender is practically a meaningless term. It just means that the government forces you to accept it. You also forget that electronic money is basically counterfeit money which gets devalued when central banks print more money. After all if central banks "print" more electronic money are there any serial numbers on the "notes"?

Which is why I added the point after the notes being destroyed once they entered the Bitcoin type system. Of course an institution taking in the notes would have the ability to check if they are counterfeit or not, not to mention that some central banks are unable to detect counterfeits of their own currency. Lets be honest, how capable are the banks of detecting that old 1000 rupee notes being deposited with them are not counterfeit?

If anything the new currency created from old 1000 rupee notes would hold its value better in the long term compared to the rupee term as there is only a limited amount of them in circulation.

One would expect people faces with lack of cash to adopt some substitute currency. Is that happening?

Not really on any scale. Mostly the liquidity crunch is slowing down or shuttering business activity. There is new cash being produced, it's just not enough and not circulating.

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