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Response to post #36

Let me explain.

Demo - on the surface, it looks like an easy switch of notes for a few days and at best 2 months. So why should this impact the economy.

Anytime one disrupts flow of - currency, people and goods, then the economy will get disrupted. Here all 3 got disrupted as people abandoned work and stood in queues.

First, Businesses running on cash had to deposit all the money and then withdraw in small lot of 20k inr for months distorting their cash flow. Why ? Because banks ran out of cash and had to impose cash limits to avoid full scale rioting.

Second, business sentiment collapsed. People simply stopped buying after demonetisation. They only spent on essentials leading to massive inventories piling up across the country leading to systemic losses. And these businesses could not pay the bank loans and started defaulting which led to banks collapse - IDBI and ilfs and other state led banks. Hence they had to do a full scale bank recapitalisation.

The business sentiment was down for months (and still not recovered fully), severely disrupted the businesses and millions collapsed across the country.

Same thing happened last 3 months back. Fuel prices went sky high and then it came back down. But business sentiment collapsed in the meanwhile and people stopped buying cars and scooters leading to massive inventory pile up and losses.

not to mention, there are lots of cascading impacts due to demo which I have not listed here.

<blockquote data-quote="Jaykay767" data-source="post: 417476" data-attributes="member: 26832">Response to post #36Let me explain.Demo - on the surface, it looks like an easy switch of notes for a few days and at best 2 months. So why should this impact the economy.Anytime one disrupts flow of - currency, people and goods, then the economy will get disrupted. Here all 3 got disrupted as people abandoned work and stood in queues.&nbsp; First, Businesses running on cash had to deposit all the money and then withdraw in small lot of 20k inr for months distorting their cash flow. Why ? Because banks ran out of cash and had to impose cash limits to avoid full scale rioting. Second, business sentiment collapsed. People simply stopped buying after demonetisation. They only spent on essentials leading to massive inventories piling up across the country leading to systemic&nbsp; losses. And these businesses could not pay the bank loans and started defaulting which led to banks collapse - IDBI and ilfs and other state led banks. Hence they had to do a full scale&nbsp; bank recapitalisation. The business sentiment was down for months (and still not recovered fully), severely disrupted the businesses and millions collapsed across the country.Same thing happened last 3 months back. Fuel prices went sky high and then it came back down. But business sentiment collapsed in the meanwhile and people stopped buying cars and scooters leading to massive inventory pile up and losses.not to mention, there are lots of cascading impacts due to demo which I have not listed here.</blockquote>

[QUOTE="Jaykay767, post: 417476, member: 26832"] Response to post #36 Let me explain. Demo - on the surface, it looks like an easy switch of notes for a few days and at best 2 months. So why should this impact the economy. Anytime one disrupts flow of - currency, people and goods, then the economy will get disrupted. Here all 3 got disrupted as people abandoned work and stood in queues. First, Businesses running on cash had to deposit all the money and then withdraw in small lot of 20k inr for months distorting their cash flow. Why ? Because banks ran out of cash and had to impose cash limits to avoid full scale rioting. Second, business sentiment collapsed. People simply stopped buying after demonetisation. They only spent on essentials leading to massive inventories piling up across the country leading to systemic losses. And these businesses could not pay the bank loans and started defaulting which led to banks collapse - IDBI and ilfs and other state led banks. Hence they had to do a full scale bank recapitalisation. The business sentiment was down for months (and still not recovered fully), severely disrupted the businesses and millions collapsed across the country. Same thing happened last 3 months back. Fuel prices went sky high and then it came back down. But business sentiment collapsed in the meanwhile and people stopped buying cars and scooters leading to massive inventory pile up and losses. not to mention, there are lots of cascading impacts due to demo which I have not listed here. [/QUOTE]

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