tag:blogger.com,1999:blog-19649274.post7180662530584572986..comments2024-03-27T17:16:12.789+05:30Comments on The Leap Blog: We don't know much about what the exchange rate ought to beAjay Shahhttp://www.blogger.com/profile/03835842741008200034noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-19649274.post-24379524050252702382013-08-17T08:59:49.120+05:302013-08-17T08:59:49.120+05:30I agree - non-establishment economists have indeed...I agree - non-establishment economists have indeed been warning. To a very large extent even the outgoing RBI Governor has been warning (and it requires courage to do so in the Indian bureaucratic setup). Not holding his brief just because of intimacy, but i would give him all credit for whatever has been done. <br /><br />i started my post with a caveat that my comments may not directly relate to the subject article so please understand i have read this wonderful piece and am in agreement. like many in INDIA, i am a great fan of Ajay Shah. <br /><br />i started a tangentially different string with a comment on the futility of these short term measures - which is what you also endorse. <br /><br />I know i cannot say US has a long history of CAD. USD enjoys the reserve currency status one might say and hence capital flows compensate. Australia has no less a different history. Current Account to GDP in Australia averaged -4.20 pct for 30 years from 1980, reaching record low of -6.20 pct in December of 2007. But that would also go down as a different league game. Unfortunately we are in the league of Turkey and South Africa. <br /><br />This argument can go on endlessly - and that is not my intention - i am not an economist - just a common (sensed) man.. <br /><br />In many ways Bernanke and Subba Rao rode the roughest times of their respective economies - Let us hope the Rajans and Summers or Yellens of the world get the luck of the Carneys of the world..<br /><br />MMS's credentials are i thought on public domain - his background as an Oxford economist, his positions in UNCTAD, finance ministry, planning commission, his stellar role in early 1990s when the country had barely half a months fx reserves.. what more do we need. Maybe his folly was to abolish the licence raj at the instance of IMF - but that was a tradeoff for dough in the bowl we were holding.. Times are different and monetary policies have not been effective.. Central banks are growingly losing their independence and a total obfuscation will be the way forward<br /><br />Will be extremely happy if an overnight fix is coming and that is successful.. Guruhttps://www.blogger.com/profile/12077829871887815575noreply@blogger.comtag:blogger.com,1999:blog-19649274.post-85860348382219936122013-08-16T18:27:43.090+05:302013-08-16T18:27:43.090+05:30Huh? You seem to have missed the point and the art...Huh? You seem to have missed the point and the article. <br /><br />What specific suggestion are you looking for? For the Droopee? Nothing needs to be done. What exactly are you hoping for? Didn't you read the article? For the CAD, again, nothing needs to be done (currency depreciation helps with that to some extent). <br /><br />And, we need to get out of this habit of short-termism and focus on fundamentals of domestic production and export sector, to make them more competitive by sound long term policies. <br /><br />And, you can just see what other non-establishment economists have been saying for the past 2-3 years to see that it is indeed commonsense as to what needs to be done. The threat of CAD crisis, capital flight, currency, inflation are not new problems. Just read what other economists have been saying in any of the newspapers, for quite some time now. <br /><br />Just because something is a cliche, doesn't make it wrong. The commonsense question is why have these cliched focus on fundamentals not been carried out for such a long period? Why do we expect or deserve any better when the fundamentals have not been looked after for so long? <br /><br />I find your comments on RBI and MMS amusing. Do you have any evidence of their expertise? The very fact that a) they are battling this for weeks, and b) in the most childish manner possible, is evidence to the contrary. <br /><br />Actually, there is an overnight fix for everything and it is coming up:<br /><br /><a href="http://www.theunrealtimes.com/2013/08/12/raghuram-rajans-handsomeness-averts-indias-economic-crisis/" rel="nofollow">Raghuram Rajan’s handsomeness averts India’s economic crisis</a><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-19649274.post-74168526503889738542013-08-16T14:08:30.859+05:302013-08-16T14:08:30.859+05:30Agreed, Mr/Miss/Mrs Anonymous.
Do you have a sugge...Agreed, Mr/Miss/Mrs Anonymous.<br />Do you have a suggestion or suggestions to offer?<br />i don't have any, honestly. <br />There is none actually that will work wonders overnight. <br />Its becoming a cliche to hear 'focus on fundamentals and don't treat the symptoms'. If it was so clear at a macro level, someone as distinguished as Subbarao would have done differently from whatever we have seen in the last 3 months.. <br />Govt is afterall the same set of people that was earlier common ma(e)n Manmohan Singh is not someone who does not understand Central Banking nor is he new to currency crisis. And, if someone had known 'we will get into this currency crisis situation', probably he or she would not have pushed it either. I don't know but if it just common sense, we wouldnt be battling for weeks at a stretch.. Guruhttps://www.blogger.com/profile/12077829871887815575noreply@blogger.comtag:blogger.com,1999:blog-19649274.post-27175160958253944062013-08-15T15:50:49.811+05:302013-08-15T15:50:49.811+05:30One more point. Lets talk about how we got into th...One more point. Lets talk about how we got into the currency crisis situation and make sure we don't do that again. In other words, while we are all talking about how to fix this currency crisis, why don't we focus on the actual problem of how we got here? Why is the media and intelligentsia not asking the govt about this? Why is the govt allowed to behave like this currency crisis is some exogenous phenomenon that occurred independent of its disastrous policies. Lets talk about how we got here, shall we?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-19649274.post-4856222449074087192013-08-15T13:00:07.554+05:302013-08-15T13:00:07.554+05:30"Why not the government invite prize-winning ..."Why not the government invite prize-winning suggestions on how to tackle this currency crisis?"<br /><br />Did you even read the article? The admin should stop focusing on just relieving the symptom and focus on the real problem. The currency will be strong only if the economy is strong. Period. There is nothing else to be done to manage the volatility or direction or whatever. Focus on the fundamentals of the economy.<br /><br />Secondly, what needs to be done is common sense. No need for prize winning suggestions. Its not rocket science. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-19649274.post-7421249186247315192013-08-15T10:32:27.556+05:302013-08-15T10:32:27.556+05:30This comment has been removed by a blog administrator.Sharathttps://www.blogger.com/profile/09780250652024335739noreply@blogger.comtag:blogger.com,1999:blog-19649274.post-88427335374146403292013-08-14T16:06:54.322+05:302013-08-14T16:06:54.322+05:30While not directly relating to the subject of '...While not directly relating to the subject of 'measuring an exchange rate', i see INR again weaker after the FM announces measures that includes issuance of quasi-sovereign bonds to be raised by PSU FinCos plus some likely relaxation on the ECBs. <br /><br />Will it not be a better idea to pay, say 4% for 3 years, for all FCNR deposits - any PSU that would raise a 3-5 year bond will end up paying 300-350 basis over midswap.. Rather than adding that way to the external debt (when RBI already has a 280b reserves), it would be more useful if the NRI gets that benefit. A lock-in period or some attractive frills can be embedded so that the NRI sees value. An NRI will also close loans taken for the purpose of remittances - out of his earnings - which will help a non-disruptive process of closing out the liability (opposed to a PSU loan where halfyearly repayments will create sufficient noise in the onshore markets).<br /><br />A run-down in gold reserves by say 5b will also help but it may have other ramifications internationally..<br /><br />Why not the government invite prize-winning suggestions on how to tackle this currency crisis? Rather than leaving it to the panelists in prime channels (who range from agricultural ministers to film-personalities turned MPs to ever-pessimistic opposition leader, and as if this is not enough, a terrible moderator among them from the channel), it would be better to hold intelligent debates and discussions that pave a way for managing this crisis.<br /><br />The worst is yet not over - a possible downgrade by major rating agencies (say the foodbill passage and its impact on the fiscals) is likely to make matters worse for the PSUs or whoever is likely to raise FC debt. <br /><br />Guruhttps://www.blogger.com/profile/12077829871887815575noreply@blogger.comtag:blogger.com,1999:blog-19649274.post-7237986840439607582013-08-14T09:10:50.202+05:302013-08-14T09:10:50.202+05:30Ajay, thanks for a great article. Is it that polic...Ajay, thanks for a great article. Is it that policy makers are guessing what the right exchange rate should be (a frightening prospect), or is it that they need to smoothen the transition to whatever the right market-determined rate is. The latter seems more like the concern here, because sharp volatility can create long term consequences, without time to adjust to the change...Alokhttps://www.blogger.com/profile/05491494770323276986noreply@blogger.com