"This is one of those cases in which the imagination is baffled by the facts. — Adam Smith
All money, Smith had observed, is a matter of belief. And so it would seem is the value of the rupee. Every few years the rupee makes headlines as it tumbles from stability to volatility. The journey from systemic somnolence to stated “concern” to panic depends on the velocity of volatility and the momentum of events.
India has had one or two major crises every decade and nearly all of them have arrived at the intersection of internal fragility and vulnerability to external shocks. Typically the narrative starts with a chorus of knowingness, assertions about the rupee being overvalued, the dire need for a correction et al. This is followed by a theorizing of benefits—a boost for exporters and a damper on imports The cause of a currency’s slide is never homegrown and is always a consequence of global factors. The normalisation of the abnormal then blends into the narrative—if you call your bank for travel dollars, most likely you will be told, ‘Can you wait till this Turkish issue blows over?’ This is followed by a ‘just in case’ phlegmatic posturing about the possibilities of Trumpism. As Alan Greenspan once said, anything can be a proximate cause for a crash, a fall or a slide."
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