Courtesy of Mish.
Currency Lessons
Brazil learned a currency lesson first, now India. Is Australia next? Japan?
The lesson I am talking about is the widely held misconception that a sinking currency will make manufacturers more competitive and thus help the economy.
A friend from Australia emailed such thoughts to me a few days ago regarding the sinking Australian dollar.
But recall what Brazil’s finance minister said on March 3, 2012 in a currency war declaration on the US: “When the real appreciates, it reduces our competitiveness. Exports are more expensive, imports are cheaper and it creates unfair competition for businesses in Brazil“
In a flash forward to August 25, 2013 we see Brazil Plans $60 Billion Currency Intervention Scheme; Indonesia Abandons Intervention, Adopts Other Measures.
Let’s now turn our attention to the Indian Rupee.
50% Decline in Rupee in Two Years
Conventional Wisdom vs. Reality
My Gosh! With a 50% selloff, conventional wisdom suggests India ought to be in heaven.
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