Having experienced all the free access to ideas, I know what I am missing. For instance, the opinion pieces at FT. Three years ago, Martin Wolf's analysis there made a great deal of sense to me, which I blogged about:
To put it crudely, the US wants to inflate the rest of the world, while the latter is trying to deflate the US. The US must win, since it has infinite ammunition: there is no limit to the dollars the Federal Reserve can create. What needs to be discussed is the terms of the world’s surrender: the needed changes in nominal exchange rates and domestic policies around the world.I would love to find out what Martin Wolf has been writing about recently; but, those damn paywalls! (a note to readers: you can always send me gift subscriptions; haha!) I bet he has had some insightful comments, especially about how all these fit into the Indian rupee story.
More than a year ago, in May 2012, I noted this:
Indians better start getting used to the fifties. In fact, buying a dollar for 55 rupees might even sound like a good deal because chances are high that it could get worseShit happened for India and the rupee. A whole lot over the year since then
The rupee plunged 8.1 percent this month to 65.7050 per dollar in Mumbai, according to prices from local banks compiled by Bloomberg. This is the biggest drop since March 1992 and the steepest among 78 global currencies tracked by Bloomberg.And to think that the exchange rate when I left India for good back in 1987--of course, a rate that was fixed by the government and not by the market--was about 12 rupees to the dollar!
Of course, we need to keep in mind that the falling rupee by itself is not the problem as much as it is a symptom of much deeper problems:
The accumulating signs of economic distress — slower growth, a widening current-account deficit, higher oil prices and rising inflation in general — suggest that the monthlong fall of the Indian rupee in currency markets may be a symptom of fundamental troubles in the Indian economy and not just part of the broader difficulties experienced by Asian emerging market currencies in recent weeks.India's prime minister, Manmohan Singh, who was the architect behind the economic liberalization policies twenty years ago, and who is caricatured in plenty for his silence and not saying anything, spoke on this issue:
Hints that the Federal Reserve in the United States may soon shift to a tighter monetary policy have prompted global investors to shift billions of dollars out of financial markets from São Paulo to Jakarta to Mumbai, eroding the value of local currencies in developing economies. But the Indian rupee has fallen the fastest of any emerging market currency in the last month, down 8.1 percent. Broader investor disenchantment with emerging markets has been compounded here by worries about India’s economy
Singh blamed global unrest and a huge current account deficit for the fall of the Indian rupee, which has depreciated sharply against the dollar since the last week of May and fallen by around 20 percent since the beginning of the year. The 80-year-old economist restated his government’s commitment to reforms.It is crazy to realize that this development is no surprise at all. The surprise is that nothing was done over the year, which speaks a lot about India's dysfunctional politics, I suppose. Back in May 2012, I noted what the Financial Times had to say:
Singh placed the fall of the rupee on global unrest and the fear that U.S. Federal Reserve is on the verge of ending its easy money policy. This turbulence has not only pulled down the value of the rupee but also other global currencies like the Brazilian Real and the Turkish Lira.
The symbol of India’s fall from grace is the rupee. It has sunk more than 17 per cent against the dollar this year to its lowest level on record. That ought at least to have helped exports. In fact they have shrunk, along with industrial output, which fell 3.5 per cent in March....It is just bizarre, and depressing, that the tea leaves were interpreted pretty much the same way by experts, and yet nothing was done over the nearly two years.
If foreign investors take fright, India’s balance of payments situation could quickly deteriorate. Standard & Poor’s has warned it may downgrade the rating on India’s sovereign debt unless Delhi can get the fiscal deficit under control. India also needs faster growth to help bring hundreds of millions of people out of abject poverty.
As always, it is not the rich or the upper-middle-class that will suffer, but it will be the millions of poor. The inflation that Martin Wolf warned about three years ago means that the prices of everyday items, especially food, have increased considerably.
If only India had made use of the opportunity when easy money flowed in from the rest of the world! Instead, the country made a big pitch to the world to recognize the rupee as an international currency and celebrated the creation of a symbol for the currency!
As I often comment, it is always one heck of a horse race between India and Argentina on wasting opportunities and doing the worst possible things at the worst possible moments. Let us see if Argentina can match this, or even raise the stakes!