Tuesday, November 8, 2016

I do it different

Reading Moneyness on India's re-denomination of higher denominations, as a preventative for criminals. Rogoff proposed something similar, key passage:

Both schemes are intended to create a logistical nightmare for money launderers; but whereas Rogoff's entails altering the denomination structure of banknotes to get this effect, Modi's aggressive demonetization keeps that structure intact while using note redemption and re-issuance as its lever.

I said, what could he money launderers be doing.  I checked drug usage in India, first figure to pop up was much less than 1%, way below USA.  So, this has to be factored in.

 If the money launderers are simply avoiding nonsense bureaucracy, then there will always be a low transaction  path to liquidity.   The re-denomination becomes the bottleneck to everyone when the money launderers are needed to grease the wheels, they will get their spot on the queue.

If drug usage is low, then something is mostly working over there, sort of a quick check, like an approximate scan.

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