Will Notebandi Kill the Rupee?

Asad Dossani

Since Notebandi was announced, the rupee is down just over 2% against the dollar. Seems small, given the chaos that's been unleashed. The initial goal was to punish black money. A sensible goal, but the implementation was awful. The Aam Aadmi couldn't replace his old notes with new ones.

Cash remains scarce. Rather than fix the problem, the goalposts have changed. It's no longer about black money. It's now about a cashless economy. And despite what everyone says, a cashless economy is a terrible idea.

But something bigger is brewing. This is about more than just replacing cash. This is about control over your money. This is the loss of security. The security of knowing that your hard-earned money isn't going to be taken away.

History has plenty of examples of government taking people's money away. Usually through inflation. The government prints huge amounts of money, making your savings worthless.

Notebandi is a little different. Rather than printing too much money, the government isn't printing enough. But the effect is similar. Your cash is worthless overnight. Consumers find it difficult to buy goods. Businesses find it difficult to pay their workers.

The worst part of Notebandi is the dangerous precedent it sets. If the government can deem your cash worthless overnight, what's to stop them from doing it again? What happens if the new two-thousand rupee notes are banned? It could be easily justified within the cashless economy framework.

Currency is a funny thing. It has value only because everyone believes in it. People must have faith that the currency will remain valuable in the future. If not, people wouldn't bother saving it. They wouldn't bother investing it for the future.

There are signs that faith in the rupee is falling. Since the day Notebandi was announced, foreign investors began selling equities and rupees. They sold net equities worth Rs 18,909 crore over a one month period. In fact, they sold equities for eighteen consecutive trading days. This broke the previous record of twelve days.

FII's pulled out of Indian equity at record pace

The rupee faces a big test in 2017. Right now, it is at a crossroads. Most of us still have faith in the rupee. Faith that the government has learned from its mistake. Faith that such an event will not be repeated.

Whatever happens, there is a silver lining. And this is a trading opportunity. If the rupee is about to crash, you can prepare for it. And you can profit from it. All you need is the right trading system. This is something we can help you with.

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14 Responses to "Will Notebandi Kill the Rupee?"
ramakrishnan k g
04 Jan, 2017
A strange take on the current situation! I dont think this is a correct picture at all.If it was seen as such a bad move,people would have been rioting [not the party sponsored ones!] and rupee would have tanked if all FII decided that Rupee is worthless.In the age of Immediate gratification,the writer is also looking at immediate results and commenting.I think ther is more to it than that and would like to read this article 6 months from now and see how far it is on target.Like 
Prakash Tamboli
03 Jan, 2017
Unfortunately in India any idiot can talk about own perceptions at large in public and declaring as general,,,, We salute our great great PM, No one in India is able to even visualise his future planning and dedication to our nation Like 
natarajan s
03 Jan, 2017
One is surprised at your ignorance. This is not demonetization but exchange of notes from old to new ones. No restriction on the amount of deposit. Because of the need for secrecy and suddenness, the preparation was inadequate. Whether you like it or nit the great people of India tolerated it patiently. Did not fall into the hands of people with huge accumulation of blackmoney. who tried to create chaos. It may have irritated people like you and u r presenting a false picture of things. i have come to the conclusion that u r a pretender with ulterior motive.Like 
dipak mehta
03 Jan, 2017
i beg to differ with your comments on currency . you have not taken into account the Trump effect in your article. Also you have not taken into account the mass production of currency by UPA 2 due to humoungous scams which resulted into round tripping requiring indian rupees against ill-gotten usdollars raising usdollar value to Rs 68 from 62 in two days time !! the money supply via high denomination notes increased from 2012 to 2014 from 34 pct to 76 pct during that period. what was the need to print such volume and value of the currency ?? Mody time printed notes from 74 to 86 % . where this would go ?? i has to stop some where !! no country has such percentage of high value notes !!! we would be banana republic in next 5 years if this printing continues !! have you ever thought of it ? i am sorry to state that your article is not taking into account these facts but ignoring it and does not even mention the advantage of this demonetisation which brought out from the godowns stocked currency worth 5 lac crore which will have multiplying effect of 15 to 20 lac crore !!! what this money can bring without printing more ??? i would humbly request you to re-write your article in a neutral way . Forbes magazine or any foreign media has to right worst about demonetisation as this black money keeps their economy going merrily!! unless they criticize they cannot stop good things happening in India on long term basis !! you are also ignoring the facts that these stocked money which will now come into production will create jobs and other welfare scheme for lower strata of the population bringing half-hungry , half-naked, illetarate population some better days !!! you should have also highlighted that SIT published report that only in Education in 2014 amount of 48200 crore was generated by way of black money !! no wonder why our bright minds go abroad for better and cheaper education thus not losing brains but we infact "donate" our brains to these countries at huge dis-advantage to our country !! also we are disadvataged in defence too !! i would once againhumbly request you to review your article and re-write with proper perspective from various angles . Mody did not have any other powerful weapon for a surgical strike which has been over due since long but no one had political courage to do so to change the course of destination of our country. if you write proper article you would do omen service to the country i strongly believe i apologise to be too frank in mentioning my views (i have mentioned limited views while i do have more angles and views to this issues) but it is time that correct perspective are brought to the attention of the people as we are duty bound to do so for the benefit of our future generations tks n with best rgds dipak mehta 9820098712 Like (1)
richard dias
02 Jan, 2017
Currency is the trust people keep on the country's economy If you make it valueless overnight, how can people ever have any trust on it, hereafter?Like 
shridhar ojale
01 Jan, 2017
Just observe your char between 8 Nov . to 29 Nov.2016 , pulling out of FI s. How you will relate 8 Dec figure is it buying Taking advantage / dis advantage of price movement of Dollar -Re. Is it Response to By dollar sell dollar strategy.....position.. unless other countries data expresses other wise..and comparison for previous year period is missing..pl z provide such data to comment exhaustively..Like 
Raopm
01 Jan, 2017
You wrote: " Your cash is worthless overnight. Consumers find it difficult to buy goods. Businesses find it difficult to pay their workers." ---- Totally untrue - Please dont talk like Rahul Gandhi .. My cash is worth the same - form is changed. I can buy anything under the Sun with a Cheque - I can pay my workers too. I am really sorry that Your perception is so wrong... Like (1)
MITESH
31 Dec, 2016
Atleast few things happened after NOTEBANDI 1. KASHMIR VIOLENCE STOPPED 2. MAOIST STARTED TO SURRENDER WE ARE WITH NARENDRA MODI EVEN IF CASH CRUNCH CONTINUES FOR NEXT 6 MONTHS. I AM LIVING IN SMALL CITY HAVE NOT SEEN ANY PROBLEM IN OUR CITY THE ONLY PEOPLE HAVING PROBLEMS ARE PEOPLE WHO ARE NOT WILLING TO PAY TAXES.Like 
Anil Kumar
31 Dec, 2016
Agree with you. It has been an eye opener how decades of honest, hard earned and fully tax paid income can suddenly vanish and become scraps of useless paper at the whim of an ill informed politician. Knowing our competitive politics - it has set a dangerous precedent and set a stage for even bigger and crazier experiments in the future. Hope we don't turn into a Banana republic.Like 
Dr.K. S. Ananda Kumar.
31 Dec, 2016
We are with our beloved PM N. Modi. No doubt, there were too many circulars and instructions causing confusion, people learned that very small number of people hoarded unaccounted money.One great man got the new currency direct to his door. There was about Rs.10 lakh crores deposited into banks - which means that much currency was in circulation. It takes time for the public to use less currency on person and also keeping in the house. The black money will have very few outlets. Hereafter people also prefer cashless methods to pay others. you have raised unnecessary fears that Govt can use this authority for causing problems to public. It is not going to be easy. People will agitate throughout the country.Like 
DILIP KUMAR PURWAR
31 Dec, 2016
Neither Rupee will fall against $ as you hope.FII are sellet .true .But why you have shown figuresfrom 8/11/16.They were seller in Oct16.And after 8/11/16 not because of Note bandi but because of victory of Trump and not Hillary as whole financial sector were predicting.FII selling is substantial less in Dec16 than Nov16.This will continue till Trump take over USA president on 20/1/17 & its policies are kpnown. Secondaly it will depend more on crude oil prices goes up or down.It seems you r big fan of UPA & congress.Note bandi is good step and my value of money I can purchase more.Honesty & principal for one is more important than temporary setback in economy.Actually it exposed white collar people like you that were crying foul all the time blaming politician for corruption,but now someone is taking action against corruption /black money. I have been seen your pet-ion seeking support.why it is become so important for you overnight,when the act is as old as 1961 passed by your favorite congress party.W hy Rupees became so cheaper(rs.67 against $ in 2014 though there was no note bandi in congress regime.Very sorry to see that your blind support for corrupt.Cashless is so bad than why you accepting subscription through bank transfer/credit card /debit card and managing your company without cash.Like 
Rajesh
31 Dec, 2016
People loves equity master because it created hope. They put logic to that hope. It put its own money on line to convince that they believed in what they say. There was no way to verify, nevertheless it did have impact. Off late people like Asad Dossani and Vivek are doing fear mongering, the way Robert Kiyosaki is doing in their Rich Dad Poor Dad. The whole concept of creating wealth and earning money in market involves "hope" to a great extent. Let equity master not get into " you buy me else the world is going to fall apart for you" Let these letters from Asad and Vivek be examined after 6 months (it would be nice if equity master does it itself). I am sure sure, no heavens would fallen.Like (2)
Arvind Raje
30 Dec, 2016
No. You have always been against it right from 8th November. Wait and see the follow up action in the next few months . We are with our Prime Minister.Like (3)
Harendra Dave
30 Dec, 2016
This views are totally biased seems to be aired to prejudice not so economy savvy minds. +ve or -ve view on any issue can be legitimate and genuine. But purposefully articulated extremism peel out from every proposition out forward in this article. I am sure you yourself know what is propagated is not sound economic logic and I strongly disapprove such biased propagations. If you want I can argue out with you on what I stated here.Like (5)
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