Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

Indians Turn “Black Money” Into Gold

  by    0   0

Many Indians have thwarted a government policy to bring the underground economy out of the shadows by converting their “black money” into gold.

Last fall, the Indian government announced a surprise demonetization policy meant to drive so-called black money out of the shadows, declaring current 1,000 and 500 rupee notes would no longer be valid. The suddenly worthless note notes made up 86% of the currency in circulation in the country at the time. The move made virtually all of the cash in India valueless.

The government policy was meant to force Indians to trade in the old notes for new ones. But there was a catch. The government placed limits on the amount of currency Indians could exchange, but no limits on bank deposits until the end of the year. The idea was to push Indians into putting their hoarded cash in the bank – thus bringing it “out of the shadows.” The demonetization policy resulted in severe cash shortages that persist to this day in some areas of the country.

Indians complete nearly 90% of all transactions in cash. It is an overwhelmingly cash economy, and virtually every Indian has currency stashed away in their home – black money. Transactions using this black money mean no taxes collected. Therein lies the rub for Indian authorities. Government estimates show that only about 1% of the Indian population pays any taxes at all. By making the 1,000 and 500 rupee notes valueless, government officials hoped to force this black money into the light in order to get their cut.

It didn’t quite turn out that way.

According to a report in the Economic Times of India, many Indians skirted the government scheme by using their black money to buy gold.

Income Tax officials said black money holders avoided the bank-deposit route because they wanted to conceal their identities and somehow had “managed to get many jewelers” to convert their unaudited cash into gold.”

Tax officials attempting to track black money say gold jewelry sales spiked the night of Nov. 8 after the government announced the demonetization policy.

“Jewelers offered a platform to convert unreported cash into gold,” one official said.

To avoid reporting the transaction, sellers simply split single transactions into multiple sales in order to keep them below the Rs 2 lakh threshold that triggers reporting requirements in India.

US tax laws also allow you to buy and sell gold while maintaining your privacy. Download the SchiffGold Guide to Tax-Free Gold and Silver Buying to learn the IRS rules.

Tax officials were able to track some of these transactions, but its certain that the vast majority of the gold sales went undetected.

Gold historically offers the ultimate safe haven. While government policies can readily manipulate the value of paper money and fiat currencies – or in the case of the Indian government simply declare it worthless – they cannot devalue gold. Gold is money. Fortunately for many Indians, they were able to convert their valueless paper into real money  – gold.

 

WhyBuyGoldNowBanner.070815.590

Get Peter Schiff’s most important Gold headlines once per week click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!


Related Posts

More Cause for Concern: Retail Sales Tank

We have yet another reason to be concerned about the direction of the US economy. Earlier this month, we reported that the ISM index of national factory activity for September came in under 50 for the second month in a row. This indicates that manufacturing is contracting. The September ISM nonmanufacturing index wasn’t a whole […]

READ MORE →

Is the National Debt Really Just Money We Owe to Ourselves?

The national debt continues to spiral upward. It increased by another $1.2 trillion in fiscal year 2019. But Paul Krugman says it’s not that big of a deal. He downplayed the national debt in a tweet, claiming emphatically that “DEBT IS MONEY WE OWE TO OURSELVES.” This encapsulates a common Keynesian argument. Debt can’t really burden […]

READ MORE →

Are Americans Close to Maxing Out Their Credit Cards?

Consumers continued to pile on debt in August, according to the latest data released by the Federal Reserve. But credit card debt fell slightly, raising a troubling question: are consumers close to maxing out the plastic? Total consumer credit grew by another $17.9 billion in August. That represents an annualized increase of 5.2% and pushes […]

READ MORE →

Gold: An Anchor of Trust

gold barsCentral banks globally added a net 57.3 tons of gold in August, continuing a gold-buying spree that’s been going on for months. Countries like Russia and China are seeking to minimize exposure to the US dollar and undermine the ability of the US to weaponize the greenback as a foreign policy tool. But there are even […]

READ MORE →

Fed Set to Launch “Massive” Bond-Buying Program — In Other Words QE

The Federal Reserve is set to begin what a MarketWatch article called a “massive” bond-buying program. Jerome Powell announced the program last Tuesday and the central bank released more details about the plan on Friday. The Federal Reserve will buy $60 billion in short-term Treasury bills each month. According to a statement, the purchases will […]

READ MORE →

Comments are closed.

Call Now