The Impact Of Demonetization On Indian Economy

There are only a few ways to increase production, which include hire more workers, increase hours, buy more equipment, and take advantage of technology to produce more. The government must form a way that the economy doesn’t grow too slow or fast so they can prevent disastrous events. The importance of modern currency lies in its purchasing power. Inflation signals the rising prices, but the way to think about it isn’t like that, but that the currency’s purchasing power decreases. With hyperinflation, fixed loans are impossible because nobody wants to risk it when the money can potentially become worthless. With moderate inflation, it can destroy wealth if it isn’t managed properly. Inflation is good for those who owe debt, but bad for those who lend money. Inflation may be bad, but deflation is worse. Prices fall because the economy is broken, but now the economy is broken because the prices have fallen.

Eliminating the penny would not be the first time the U.S. has abolished a small denomination. For example the half-cent coin was eliminated in 1857 with little to no trouble. This was due to the half-cent’s production cost exceeding its face value similar to the penny right now. Also the half-cent was deemed no longer necessary in purchases just as the penny is no longer necessary today.

All of this ties back into the original problem with pennies. Fiat currency cannot itself be worth more than the value it is given. It would make absolutely no sense to take a dollar worth of gold and make it into a 50 cent coin. If this was done, people would just use the coin as gold, not the 50 cent piece it was supposed to be. When the material fiat money is made out of is worth more than the government proclaimed value, the purpose of that currency has failed and it has turned back into commodity currency.

For example, when someone sees a penny on the road, they don’t pick it up anymore. Inflation has taken away the value of the penny. It is simply no longer useful now. The penny has always been the coin with the lowest value so no one really cares about one cent. The penny should be abolished because nobody really cares about it any more.

A law has passed in 1764 known as the Currency Act to resolve the currency scarcity and lack of proper economic structure. It is design to illegalize any new model dollars, not even reprint already used money. Additionally, it simply demolishes the colonial cash by having a more “hard currency” network using pound sterling. A huge repercussion occur, when there is a massive trade deficit and it only made the overall economy much more dire. This policy not only damages the merchant, but it also did not financial help the British troop to get the economic resources they need.

However, nowadays, the vending machines don’t accept pennies and payphones have become obsolete and not used because everyone has their own phone. Also, the U.S. has some experience with eliminating defunct currency. In 1857, they stopped minting the half cent coin, equivalent to about 11 cents today, after Congress realized that its purchasing power and cost of production had made it impractical (Wing 4). The move led to no immediate or long-term effects on the value of U.S. currency just like the penny would. While eliminating the penny will save the country money, the elimination will also save people’s time.

Our society is in a downhill spiral. There is no liberty, no equality and there is no physical value of money. We live in a world in which prison companies and children’s hospitals are traded publicly on the stock market. Virtual currency is the only thing that these corporations strongly care about. There are no boundaries when profits are in concern. We live in a society that is dominated by the attraction of money. Greed is the characteristic that is pervasive, not generosity or compassion. People are encouraged to be selfish, not charitable. The idea and function of governments will only change if people’s minds alter first.

Approximately 715,000,000 bills weighing 7,000 tons are shredded every year. This number accounts for 3% of the total value of paper money in circulation. Why are more one dollar bills shredded than one hundred dollar bills each year? This is because one dollar bills are more often used to buy goods and services each year than one hundred dollar bills. Consequently, one dollar bills have shorter

The political and economical issues spread beyond the government and to the community in Zimbabwe. For 15 years prior, the economy is Zimbabwe had been slowly fading but after the recent election the unemployment rate rose to eighty percent (“Govt” 1, 2). The number for jobless people increased to a massive number of nearly 200,000 making the eleventh year high up to 3.33 million (“Bankruptcies” 1, 2). This made it extremely challenging for families to afford things like education, health care, and even housing. As a result, this forced people to turn to crime and corruption just to try and make a living. While the citizens were turning to crime, the government was wasting all it’s money for personal needs. It was also discovered that the government had been paying more than 40,000 to what was referred to as “ghost workers” appearing on their payroll (“Govt” 1, 2). As a result of this, Zimbabwe was part of a huge fraud situation with the Nigerian Deposit Insurance. They were accounted for seventy-four cents for all fraud counts (“Our” 1). Soon after this scandal, Zimbabwe had no choice but to declare bankruptcy making the country record, 1082 bankruptcies as of 2008 (“Bankruptcies” 1, 2). After the fraud situation the government tried to cover up by creating an Anti-Corruption Commission (ACC). The government was interested in fixing

Concerning money, it's practically futile to have it in a genuine monetary fall since its esteem may be annihilated.

Soviet Union/Russia – The Mikhail Gorbachev Government, in 1991, banned the currency note of Ruble 50 and 100 in Soviet Union in an attempt to end and render valueless the huge amounts of black money that had amassed among the corrupt in the country. The government towards it final moments expected that the implementation of this said plan will decrease the market of black money substantially and give a proper life to common people. The reform failed to halt inflation, and instead served mainly to accelerate a slide in public confidence in the government. As political infighting combined with economic collapse, Gorbachev faced a coup attempt that August which destroyed his authority and led to the Soviet break-up the following year. In the subsequent years however progress in stabilization did not lead to a widely expected rapid expansion of wholesale markets based on the cash Ruble. The share of economic transactions and budget based operations in money surrogates and barter increased sharply despite all efforts by the government towards its prevention, along with specialized non-cash intermediary organizations, a fragmentation of markets, and an elaborate differentiation of prices for the same commodities according to type of transaction. As opposed to the past, when barter prices were commonly decreased below cash prices as a means of tax avoidance, average non-cash prices have become significantly higher than their cash counterparts. This created a problem in the

Ever since the US dollar went off the gold standard in 1971, other countries have had doubts about keeping the dollar as the world’s reserve currency. The first concern was that no fiat currency has succeeded long-term. In a study of 775 fiat currencies (Mack, 2011), there was no historical precedence for a fiat currency that has succeeded in holding its value. 20 percent failed through hyperinflation, 21 percent were destroyed by war, 12 percent destroyed by independence, 24 percent were monetarily reformed, and 23 percent are still in circulation approaching one of the other outcomes (Mack, 2011). The average life expectancy for a fiat currency is 27 years, with the shortest life span being one month (Mack, 2011). It is one thing if an individual country’s fiat currency collapses, but if a world reserve currency collapses, such as the US dollar, the world’s economy will collapse with it.

dollar. In dollarization, the country abolishes its own currency and uses a foreign currency, such as the U.S. dollar, for all domestic transactions. 6. Emerging market exchange rate regimes. High capital mobility is forcing emerging market nations to choose between free-floating regimes and currency board or dollarization regimes. What are the main outcomes of each of these regimes from the perspective of emerging market nations? There is no doubt that for many emerging markets a currency board, dollarization, and freely-floating exchange rate regimes are all extremes. In fact, many experts feel that the global financial marketplace will drive more and more emerging market nations towards one of these extremes. As illustrated by Exhibit 2.5, there is a distinct lack of “middle ground” left between rigidly fixed and freely floating. In anecdotal support of this argument, a poll of the general population in Mexico in 1999 indicated that 9 out of 10 people would prefer dollarization over a floating-rate peso. Clearly, there are many in the emerging markets of the world who have little faith in their leadership and institutions to implement an effective exchange rate policy.

As a part of new economic reforms initiated in 1991, rupee was made partly convertible. From March 1992 under the “Liberalized Exchange Rate Management scheme”, in which 60% of all receipts on current account (i.e. merchandise exports and invisible receipts) could be converted freely into rupees at market determined exchange rate quoted by authorized dealers (AD), while 40% of them was to be surrendered to Reserve Bank of India at the officially fixed exchange rate.

This act, in essence, was formed to keep in check the foreign exchange resources in the country and hence all business deals involving foreign exchange need to be authorized by the Government. It is drastic in nature as it does not allow arbitrary trade in foreign exchange of any form, as this is a resource that needs to be willfully protected. Under this Act, Lalit Modi had performed a number of violations. He accepted a deposit of ₹ 200 million from UK-based Emerging Media (IPL), in contravention of FEMA, where other BCCI officials were also involved. He also contravened the provisions of Foreign Exchange Management Act (FEMA) to the