Archive for November 26, 2016

Demonetization will lead to loss of faith in indian currency

As the exchange rate of the indian rupee against the dollar and other currency declines, it clearly indicates that demonetization will lead to the loss of faith in indian currency. There are reports that there is a massive increase in gold imports to india as indian citizens who want to keep their savings outside banks and the financial system,will prefer to invest in a commodity like gold instead of keeping their money in the form of indian currency which can be demonetized by the government anytime they wish.
A commodity like gold can be easily traded at any time, in any country without any restriction, unlike indian currency which can be used only in India. The demonetization is a betrayal of those who had faith in indian currency, who thought that the money in the form of indian currency could be used for an emergency or financial crisis. Now they have to deposit the money in the bank again, and there is a possibility that they will be fined for their emergency savings on which they have already paid taxes.
Now people are withdrawing money from their bank account and investing it in other items which can be used to generate some money, as there is little faith in the banking and financial system.