December 19, 2016

The Many Canards Surrounding Currency Swap

In this Mint article, Resident Senior Fellow Vivek Dehejia presents his view on the monetary economics of the 'currency swap', otherwise known as demonetisation. He discusses four fallacies around the move, including:


"...let us assume that some chunk of the 80% of old notes that have entered the formal financial system represents black money that holders are attempting to launder into white money through one or more of many well-known mechanisms, such as using intermediaries. On the one hand, such holders of black money have paid an implicit tax—some anecdotal accounts suggest that the discount on old notes in the illegal, secondary conversation market is up to 50%. While it is true that the proceeds do not benefit the treasury, they certainly represent a tax on the holders."


Read the full article here

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