Why do countries demonetise their currencies?

Demonetisation is the process of discontinuing
the value of current currency unit and instead
introducing a new currency unit into circulation.
Nigeria, Ghana, Pakistan, Zimbabwe, North
Korea, Soviet union, Australia, India, Phillipines
are some countries which have tried demonetisation
The recent one being India.
The government of India took an abrupt step
of demonetising rs. 500 and rs. 1000 currency
So why do countries demonetise their currency?
Let’s find out:
To understand demonetisation better, let’s
look at its advantages and disadvantages:
Number one : Strike on black money hoarders:
Well, countries like Australia, North Korea,
Nigeria, India demonetised their currency
to fight black money hoarders and organisations
which counterfeit and circulate fake currencies.
in layman’s terms as soon as the government
declares that they have demonetised their
currency unit, people who stack illegal money
are left with only 2 choices, either to come
forward and pay the fines imposed by the government
or 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 circulate
and create a network of fake currencies.
These fake bank notes are then used for funding
and carrying out terror activities.
So when country demonetises its currency and
replaces it with new ones, all printed fake
money will become useless, which will further
dismantle the fake currency network.
Number three: Boost to the economy/ Lifestyle
When a country demonetises a currency unit,
people start disclosing their income.
As old currency notes become useless, and
to 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 it
in the bank again, which further becomes more
capable to loan money to new businesses.
This cycle continues, thereby increasing the
ease of doing business and gives a slight
boost to the economy.
Government starts getting a huge chunk of
tax revenue, as people rush for replacing
their demonetised currency unit.
This tax revenue can be used by the government
for 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 the
Since all their savings are in cash, which
are rendered useless after demonetisation,
they have to stand in long queues for exchanging
them in bank.
Thus crop production declines and daily wage
earners become jobless.
The worst of the worst situation will arise
when these confused affected people, to get
rid of demonetised currency take law and order
in their hands.
This will further escalate the already chaotic
Well this all can be prevented if demonetisation
is executed properly.
It all depends on how government uses their
knowledge and power, and how people react
and support government’s regime.
Actually I think demonetisation is only a
temporary solution to black money and corruption.
Demonetisation is not a permanent solution.
A country with a strong and unbiased anti-corruption
department is more than enough to fight these
What do you think can demonetisation bring
an end to black money and corruption?
Do share your views in the comment box below.
Stay happy stay curious.


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