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Black money in a cash-driven economy
December 21, 2016
Demonetization represents loss of value for money. It is a loss of legal tender. It is only one among other steps awaiting action. Substantial quantities of fake rupee currency notes pouring in from Pakistan and financing terrorist activities must halt; illegal and non-tax-paid wealth held in cash must be almost eliminated. They demand strong policing and change in the economic system. Making currency notes worthless will not stop bribery and corruption.
Paper currency notes have value because there are strong agencies,
usually governments that back them. When the governments are weakened by
war or economic crises the currency loses part of its value. No bank or
government is going to give another valuable commodity in its place
except at a lower paper value. People must trust the currency.
Diminution of trust devalues the currency.
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