How Demonetization tackles counterfeit currency and black money: Explained via analogy with Playing Cards

When PM Modi announced Demonetization on 8th Nov, he explained that it has two main objectives:

  1. Getting rid of fake currency notes that have been pumped into our economy
  2. Bringing the black money back into the economy where it can be used for country

If you were not clear about how removing high denomination notes can achieve these two objectives, allow me to explain it by drawing analogy with Card game ‘Teen Patti’ aka Flash.

Let’s say your family and friends gather on Diwali and decided to play ‘Teen Patti’ using a pack of cards of Yellow color. Let’s assume in a group of people some were dishonest.

Case 1 – Black money

In each round of game, one Mr. ‘A’ keeps looking for Aces. As soon as he gets an Ace he hides it in his cuff (a popular trick among gamblers) for use in upcoming rounds. So after every game, when pack is shuffled, number of cards are not 52 but less than that. Therefore.

  • The aces that he is hiding, is the black money that got generated.
  • It is not part of the economy (cards being distributed)
  • It deprives other players to have a fair chance of getting good hand. In real world, the money that should have been used for building schools, hospitals roads and infrastructures is trapped with some people.

Case 2 – Fake Currency

Another Mr. ‘B’ takes help from Mr. ‘C’ who is not playing the game. Mr. ‘C’ gets a pack of cards which looks exactly similar to the pack of card which is being used to play the game. Mr. C quietly slips some big cards to Mr B using which Mr B keeps winning the rounds.

  • Now after every round when all cards are put back for shuffling, some extra cards are finding their way into the pack. So effectively there are more cards than issued.
  • This disturbs the calculation of all the players. For example, if I have 2 aces, I will be sure that no one else can have trail of Aces. But with fake cards into the circulation there is a possibility that someone managed to get 3 Aces. It destabilizes the dynamics of the game and in the context of country, it can impact the economy of the country.

Lets say you figure out that there is something wrong and you strongly suspect that someone is either putting in fake cards or someone is blocking cards. You immediately announce that pack of cards will be changed from immediate effect. Instead of old Yellow color cards you decide to use Pink colored cards now onwards.

What would happen to those who were hiding Yellow color cards in their cuffs? Those cards suddenly turn into piece of paper. Just like the 1000-500 notes which were illegally held by people seized to hold any value after midnight of 8th Nov. This was black money which is suddenly of no use unless one gets a chance to exchange his old Yellow cards with new Pink cards. You won’t allow that obviously.

What would happen to the counterfeit Yellow cards that were smuggled into the game? They also don’t carry any value because now the game is being played by Pink colored cards. Mr B can’t come to you and ask you to replace his counterfeit cards since this will get him caught. So he has no option but to either burn it or drown it in the banks of river Yamuna. Sounds familiar?

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