As you may know India suddenly decided that their 1000 and 500 Rupee notes were no longer valid. To put that into perspective, when you travel to India and get spending money (say $500), that translates into about 32,000 Rupees. Thirty-two 1000 Rupee notes is a lot of paper to put into a wallet but suddenly the biggest bill that’s valid is the 100 rupee note. Converting $500 would mean I would now have to carry 320 100 Rupee notes. It’s a little like the US deciding that all paper currency is no longer valid except for the dollar bill.

The 1000 and 500 Rupee notes will be totally worthless after December 31st so masses of people are going to banks to deposit their notes. If someone has a large amount of cash and the government doesn’t like their story for how they got it, they tax people 50% on that money. And if someone refuses to say how they got their money or they can’t prove how they got it, then they get taxed at 90%.

What’s interesting is that people could decide that the 500 and 1000 Rupee notes have value regardless of what the government says and they could just continue to use them — but that’s not happening. Money is all made up and the governments get to decide what pieces of paper are legitimate and how much each piece of paper is worth. India is an example of just what governments are capable of doing with money.

The Rupee is going through something of a disaster with the Indian government saying that all notes above 100 rupees are no longer valid (like the US saying all notes bigger than a dollar are no longer valid).

Source: http://www.vantharp.com/Tharps-Thoughts/814_12_1_2016.html

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