Why do countries demonetise their currencies?

Demonetisation is the process of discontinuingthe value of current currency unit and instead introducing a new currency unit into circulation.

Nigeria, Ghana, Pakistan, Zimbabwe, NorthKorea, Soviet union, Australia, India, Phillipines are some countries which have tried demonetisationearlier.

The recent one being India.

The government of India took an abrupt stepof demonetising rs.

500 and rs.

1000 currency bank.

So why do countries demonetise their currency? Let’s find out: To understand demonetisation better, let’slook at its advantages and disadvantages: Number one : Strike on black money hoarders:Well, countries like Australia, North Korea, Nigeria, India demonetised their currencyto fight black money hoarders and organisations which counterfeit and circulate fake currencies.

in layman’s terms as soon as the governmentdeclares that they have demonetised their currency unit, people who stack illegal moneyare left with only 2 choices, either to come forward and pay the fines imposed by the governmentor to cry alone in the corner and use those stacked bank notes as tissue papers.

Number two : Strike on fake currencies:There are evil organisations running inside countries whose sole purpose is to circulateand create a network of fake currencies.

These fake bank notes are then used for fundingand carrying out terror activities.

So when country demonetises its currency andreplaces it with new ones, all printed fake money will become useless, which will furtherdismantle the fake currency network.

Number three: Boost to the economy/ LifestyleWhen a country demonetises a currency unit, people start disclosing their income.

As old currency notes become useless, andto replace it with new ones’ people start depositing their money in their bank accounts.

This has two benefits.

As more money gets deposited in the bank,the bank becomes rich and thus becomes capable of lending money for new business and entrepreneurs.

These businesses earn income and deposit itin the bank again, which further becomes more capable to loan money to new businesses.

This cycle continues, thereby increasing theease of doing business and gives a slight boost to the economy.

Government starts getting a huge chunk oftax revenue, as people rush for replacing their demonetised currency unit.

This tax revenue can be used by the governmentfor improving the infrastructure, roadways and living conditions of the society.

Well everything sounds perfect until now,but demonetisation has its disadvantages.

People living in rural areas mostly farmers,daily wage earners who don’t use credit or debit cards frequently are affected themost.

Since all their savings are in cash, whichare rendered useless after demonetisation, they have to stand in long queues for exchangingthem in bank.

Thus crop production declines and daily wageearners become jobless.

The worst of the worst situation will arisewhen these confused affected people, to get rid of demonetised currency take law and orderin their hands.

This will further escalate the already chaoticsituation.

Well this all can be prevented if demonetisationis executed properly.

It all depends on how government uses theirknowledge and power, and how people react and support government’s regime.

Actually I think demonetisation is only atemporary solution to black money and corruption.

Demonetisation is not a permanent solution.

A country with a strong and unbiased anti-corruptiondepartment is more than enough to fight these issues.

What do you think can demonetisation bringan end to black money and corruption? Do share your views in the comment box below.

Stay happy stay curious.

Source: Youtube

Why do countries demonetise their currencies?

What is demonetisation? What is the meaning of demonetisation? Recently Indian prime minister Narendra Modi / Government of India, took an abrupt step of demonetising rupees 500 and rupees 1000 bank notes from 9th November 2016!

("Rs. 500 and Rs. 1000 notes pulled out of circulation immediately" - PM Narendra Modi).

So Why do countries demonetise their currencies? Effects of demonetisation? Find out the advantages and disadvantages of demonetisation in this short animated video.

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