In November 2020, India completed 4 years of demonetization of ₹500 and ₹1000 banknotes. Now let us take a look at some events of demonetization across the globe.
Crux of the Matter
United States of America
- The demonetization of 1873 is the earliest known act of demonetization in history. It is known as the Coinage Act of 1873.
- It mandated the removal of silver and adopted gold as a legal tender. However, the Bland-Allison Act of 1878 re-monetized silver as legal tender.
- Again in 1969, President Richard Nixon demonetized all notes above $100.
- It was done in an attempt to restrict the use of black money in the country. The exercise was highly successful and marked the beginning of the American banking system.
- In 1971, the British government stopped the circulation of a pound and penny currency to bring uniformity.
- The currencies were replaced by 5 pounds and 10 pounds coins.
- As the government worked on the change for almost 2 years, the transaction happened without affecting the economy.
- In 1982, the country demonetized its currency 50 cedi.
- It was done in an attempt to clear excess liquidity and reduce tax evasion.
- It proved unsuccessful as people turned towards physical assets and foreign currency.
- In 1991, Mikhail Gorbachev removed notes of 50 and 100 Ruble.
- It formed 33% of the total money in circulation.
- Their aim was to tackle the parallel economy.
- However, it was unsuccessful and Gorbachev faced a coup a few months later.
- In 1996, the Australian government withdrew all paper-based notes and replaced them with polymer-based.
- It was done in order to improve the security features and constraint black money.
- The attempt was successful and the polymer-based notes improved its longevity.
- In 2002, the 12 nations under European Union demonetized all existing currencies of the nation.
- About 8 billion notes and 38 billion coins were distributed through 218,000 banks, post offices, and 2.8 million sales outlets.
- 9 billion national notes and 107 billion national coins were collected.
- In 2010, Kim Jong – II introduced a currency change to curb the black-market and improve the economy.
- It proved unsuccessful as people resisted the change.
- This was followed by the assassination of the finance minister.
- The government replaced the Zimbabwe dollar with the American dollar in 2015.
- The process aimed at stabilizing the economy and curb hyperinflation.
- The attempt was unsuccessful as it adversely affected the economy
- The Lion Capital Series was a series of currency notes issued after India declared its independence from Great Britain and used until the Reserve Bank of India (RBI) introduced the Mahatma Gandhi Series in 1996. The National Emblem based series replaced the George VI banknote series.
- A cashless society describes an economic state whereby financial transactions are not conducted with money in the form of physical banknotes or coins, but rather through the transfer of digital information (usually an electronic representation of money) between the transacting parties.
- Non-circulating legal tender (NCLT) refers to coins that are theoretically legal tender and could circulate but do not because their issue price, and/or their melt value at the time of issue is significantly above the arbitrary legal tender value placed thereon. They are sold to collectors and investors with no intention that they be used as money.