Archive for December 16th, 2016

Mumbai is ‘financially smart’ to manage black money, say Income Tax officials

December 16, 2016

Income Tax guys are disappointed as they have not caught the big Mumbai based fishes in IT raids across the country:

In March this year, Knight Frank’s Wealth Report-2016 said Mumbai has the maximum number of ultra-high-net worth individuals in India, followed by Delhi. Subsequently, in September this year, New World Wealth in its report said, the financial capital Mumbai homes to 45,000 millionaires and 28 billionaires is the wealthiest city in the country with total wealth of USD 820 billion, followed by Delhi and Bengaluru.

Now, consider this. Data released by Income Tax (IT) Department reveals that it has netted about Rs 300 crore in cash with Rs 79 crore in new currency notes and an unaccounted income of almost Rs 3,000 crore since announcement of demonetisation.

But, despite being the richest city in India, Mumbai registered hardly 10 per cent of the total cash seizures in last 37 days. 

Speaking to Indiatoday.in, the IT officials in Mumbai said that they were perplexed to see that no big seizure of cash had been made from the city. “It is shocking for the department, the big cash seizures should have happened in Mumbai, but that is not happening”, a senior IT official said.

However, it’s too early to conclude but the department is less satisfied with local tip-offs. Not openly, but the department has blamed the police for such a result saying “why we should bother attitude” among the policemen is killing the demonetisation action-plan.

Another major factor is the financial literacy in Mumbai is quite high. Taxmen believe that people are financially knowledgeable, well-aware and smart enough to handle and manage the black money.

“Forget the corporate companies and traders in this city, even the common man knows various routes through which the black money could be converted into white – either via hawala, commission-based agents or using stock market tools”, an IT department official said.

 I don’t know why officials think they are smartest of the lot on money matters!!
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On its own, RBI decides 26 areas to be out-of-bounds under the RTI Act…

December 16, 2016

Interesting investigation from Vinita Deshmukh, consulting editor of Moneylife who is also an RTI activist.

She says those who thought secrets of RBI hand in demonetisation could be revealed via RTI are bound to be disappointed:

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Demonetisation History: When Saddam Hussein demonetised Iraqi currency in 1993

December 16, 2016

This is a brilliant speech by Mervyn King, Former chief of Bank of England.

The speech is in a different context. It is on importance of monetary institutions and how they shape expectations. But in this he discusses the Iraq experience which is highly relevant for today’s discourse. The speech cannot be extracted due to security so here is a broad summary.

He points how Iraq was divided into two parts in 1992 – North and South with latter under control of Saddam. Due to restrictions imposed by West, Saddam decided to do deficit financing. Till then Iraq imported notes made elsewhere but they were not available anymore due to restrictions. This led Saddam to print new currency notes on an inferior paper with his image. He even demonetised ths highest denom note of 25 Dinars and asked it to be exchanged with Saddam Dinars. Eventually the Saddam regime printed many more dinars than required leading to high inflation. Plus, the Saddam DInar could be easily counterfeited as it was on poor paper and low tech.

Meanwhile in the North, the old currency continued as no avenue for exchange. No extra notes could be printed as there was no mon authority.

This presence of irresponsible policy and absence of any policy panned out differently as it became clear that Saddam regime will collapse. The North currency called Swiss Dinar appreciated as things were far more stable there.

Fascinating stuff. Time to dig in old speeches of former central bankers…

Demonetisation in US on 14 July 1969: How relevant is it for comparing with India’s demonetisation in 2016?

December 16, 2016

Anil Bokil, member of the Pune-based ArthaKranti Pratishthan is seen as the person behind India’s demonetisation drive in 2016. Despite the fact that this exercise is hardly anything new and has been done twice in the past (with little success), we take it to be some new thing designed by someone else.

Mr Bokil in this latest interview in ToI points to demonetisation in US on 14 July 1969:

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Tracking Venezuela’s inflation by Bloomberg Cafe Con Leche Inflation Index

December 16, 2016

It is around 1526% as per this new index:

Inflation is soaring in Venezuela. Everyone knows that.

But how high is it really? 250 percent a year? 500 percent? 1,000 percent? None of the above? In the absence of official data — the government long ago stopped publishing figures on a regular basis — economists are left to dial up what are, essentially, wild guesses.

Enter the Bloomberg Cafe Con Leche Inflation Index.

In an effort to fill the void, Bloomberg News has launched its own inflation gauge. It’s not necessarily the most scientific in the world, true. As the name would suggest, it tracks just one item: a cup of cafe con leche served piping hot at a bakery in eastern Caracas. For all of the index’s shortcomings, it has merits too: it’s tangible; tracked regularly; and, given that it monitors a product consumed by Venezuelans everyday, provides a unique, up-close look at inflation in one of the most dysfunctional economies on earth.

The index debuts today at an annual rate of 1,526 percent, the result of the price having soared from 450 bolivars per cup to 1,100 bolivars* over a span of 17 weeks. At this pace, or anything even remotely close to it, Venezuela would have the highest inflation in the world. Stay tuned for further readings in coming weeks.

 

Trump’s $6 Billion Cabinet: Mostly Men, Mostly White and Not Much Government Experience

December 16, 2016

Bloomberg researchers report:

Donald Trump is building a cabinet in his own image. The first billionaire U.S. president has appointed two billionaires and at least nine millionaires, with a combined net worth of about $5.6 billion, to run government departments. Two appointees to cabinet or cabinet-level positions are former generals. And fewer than half have any prior government experience. Many of Trump’s nominees have close ties to Wall Street and corporate America. Altogether, his cabinet is shaping up to look a lot different from his predecessors.

The Cabinet was more diverse in Obama’s time.

So much to save America from its Capitalists and high level corruption.


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