November 29, 2007
Your money’s no good hereEconomics
First the world’s richest supermodel stopped taking the dollar as payment for services rendered:
The catwalk star’s twin sister and manager Patricia told Bloomberg in September that: “Contracts starting now are more attractive in euros because we don’t know what will happen to the dollar…” [Link]
 |
|
Rupees only please - this is a quality establishment, we only take hard currencies here |
Jay-Z … is seen cruising the streets of New York in Bentleys and Rolls Royces (now owned by Germany’s Volkswagen and BMW) with a briefcase of 500 euro notes. [Link]
But now comes the final low blow for the beleaguered greenback - you can no longer use it to pay the white man’s tax at Mumtaz’s tomb:
Foreign tourists to many of India’s most famous landmarks will no longer be able to pay the entrance fee in dollars, the government says. The ruling is aimed at safeguarding tourism revenues following the recent falls in the dollar. Until now, foreign tourists to sites such at the Taj Mahal have had the option of paying in dollars or rupees. The ruling will affect nearly 120 sites of interest run by the Archaeological Survey of India (ASI). [Link]
That’s right gringos - put away your cheddar and feed sarkar some paneer, you gotta use rupees if you wanna license to skrill.
ennis on November 29, 2007 11:13 PM in Economics · T·r·a·c·k·b·a·c·k address · Direct link · Email post
You still, however, have to pay in dollars to get Foreign Quota tickets at the train stations. :P
Wouldn't know. When I'm in India, I never pay the NRI price or use NRI sales channels. That's why I called it the white man's tax - when I was last at Agra I paid the local price and walked on in. Never thought to pay 10x more.
PIOs won't hurt so much either way, I guess. i wonder how this is playing out on the black market.
Is there no end in sight for the demise of the dollar?
most of the developed world is overloaded on debt (which fuels china's export driven growth). worry about more than the dollar devaluation.
Yeah, though frankly I'd be more worried about being a creditor in this environment (particularly of dollar-denominated debt).
I shall have to look into obtaining one of these 500 euro notes to wrap around my "Philly-roll" (wad of cash, though I couldn't find the term so identified online--thanks for the other cool new phrases, Ennis!).
A little bit of devaluation will do the dollar good. Manufacturing threatens to return to the country because of the increasing expensiveness of imports. China and OPEC are gradually moving away from the dollar, but only very gradually because they don't want the value of their dollar-denominated assets to plummet BEFORE they get out of the dollar.
damn - i still got a few hundred USD left in a cupboard somewhere. I gotta get rid of that really quickly. Now if only I had kept the Canadian $$.
Yeah, though frankly I'd be more worried about being a creditor in this environment (particularly of dollar-denominated debt).
well, unless civilization collapses big creditors will get bailed out. they always do, right? and if you are in a position to be a creditor you have more margin than if you are a debtor ;-) filing for bankruptcy doesn't put food on the table.
Well, (1) I've got some Czarist Russia railroad bonds in my apartment's foyer, qua wallpaper (OK, I'm odd) and (2) yeah, creditors are not going to get nothing from the US, but they will take a "haircut" (e.g., devaluation of the dollar is already hitting holders of dollar-denominated debt far harder than it's hitting the average American consumer--the latter buys far less than 100% of purchases from global markets (think haircuts)). The far more difficult task will be for the US to take the world for chumps (by taking dollar-denominated debt) a second time!
I've got some Czarist Russia
like i said, unless civilization collapses ;-)
Fair enough--what are your odds on that, btw? Did you read about the uranium bust in Slovakia? I'm going with gold!!
i'm ignorant, but put at 1 out of 3 the chances for a major world wide depression in the next 15 years. i don't think the major problems are environmental or military. i think they're sociological and psychological. humans are subject to the 'irrational herds' tendency, and i think information technology is exacerbating that problem.
also, there's a long line in anthropological thinking that our civilization, broadly speaking, has over the last 10,000 years evened out short term 'corrections' and dampened instabilities at the cost of major longer term mega-disruptions. i think that's plausible.
Razib,
Would like to talk more about this, but perhaps we should take it off the board.
Rob
Razib,
That link failed (my fault, I'm sure)--hit me at robert73302002@yahoo.com
I was considering coming to New York for Christmas shopping...to take advantage of the dollar's all-time low exchange value...now I can only point and laugh at the Indians who left our country to seek "a better life" in the United States...
now I can only point and laugh at the Indians who left our country to seek "a better life" in the United States...
Yes, Americans are lining up the Indian embassies to get work visas for India. Some are going to Nepal in the hope of illegally crossing the border and finding a job in any dhaba in Eastern UP.
We'd rather be wetbacks than greenbacks?
Because its somehow acceptable to reap the benefits of the Indian public works departments and architectural trust departments, without paying Indian taxes or accepting the responsibility of Indian citizenship. India relies on the extra money charged from foreigners to preserve its architectural heritage and every rupee of lost revenue means that some exquisite Avadhi tomb goes further to seed or some poor guide with a masters degree gets paid even less of a pittance. It always fails to amaze me how some NRIs are ok paying $20 to get into the Met, but not ok doing the same in India.
I knew somebody would bring this up. For the record, the Met is pay what you wish, and I have never once given them an Andrew Jackson for the privilege. And the real reason I end up paying local prices is because I'm usually in a group of my cousins, and somebody will pay for all of us together, usually not me since I'm the guest.
Going by Bernanke's comments this morning, further interest rate cuts are likely, putting even more downward pressure on the dollar.
There's a reason why our desi culture favored Gold since ancient times : Fiat currencies are unreliable.
M. Nam
> For the record, the Met is pay what you wish, and I have never once given them an Andrew Jackson for the privilege.
So you are a freeloader in your adopted country also.
like the proverbial bats in the animal-bird fight story I guess.
Going by Bernanke's comments this morning, further interest rate cuts are likely, putting even more downward pressure on the dollar
Would you say more interest cuts within a week, months?
Give Ennis some slack will ya! He is doing India a favor by blogging on all things Desi. Goes to say he is Indian at heart.
No, I'm a cheepskate in my own country.
***
For those of you who need further explication:
My reference to being an NRI was confusing. I am an ABD. And I'm not freeloading, I always pay at any museum. I just don't pay the "recommended" amount, that makes it cheap, not free.
I believe Meena meant the Netherlands by 'our country,' not India. Right, Meena?
Though I guess an argument could be made for people who work in IT and who prefer middle class Indian life to middle class American life.
>>Would you say more interest cuts within a week, months?
The Fed's meeting on Dec 11th - the stock market has already priced in a 50 basis point cut.
M. Nam
furthermore, PWYC is typically used for slow-days to bump up traffic volume, eg monday matinee or tuesday evenins. There is a strong financial reason. they arent losing money.
Wait, makes no sense - they've still got to buy those rupees from somewhere. Now some Indian bank gets saddled with the dollars instead? Is that an improvement?
If the dollar keeps falling against the rupee, they're better off fixing admission in rupees rather than dollars.
i think the bank is better suited to managing FX risks than some tourist site. its clearly better. although the demise of the greenback is annoying. thats why i hold all my debts in USD and a lot of assets abroad. my only USD asset is my primary residence. i would rather not sell my home. its pretty.
all the places i would like to live in asia are pegged in some way to the dollar. which makes a move out the country a no-no for me, given that i h@te london.
An interest rate cut now would be unwise - the Fed's job is to keep inflation in check, not bail out financiers with cheap money. Commodity prices are still rising, oil is still high - there are still plenty of inflationary pressures that the Fed needs to be aware of.
the downside risk is that financial turmoil spills into real economic activity. im bond bullish these days...
In 1960, my first year in the United States, the exchange rate was fixed, one could get dollars only after Reserve Bank authorization (forunately, I had a scholarship in dollars, as many did in those days), and the dollar was five rupees. Some years later it became ten rupees. In the era of floating rates, it seems to have been close to fifty rupees for some years, until sinking to the present forty or so. Still, from what I have read the dollar is not about to cease to be the world's reserve currency.
nala:
Yep. I wanted to post, but you were first. ;) The reason I said that is the way some Indians go on about Europe, you'd think that we were all very much oppressed by white man. Of course every country has it's flaws, not saying it doesn't...but it's not a frickin' Third World country, ain't it?
people have realised that the EU(Euro)is the only opportunity to survive in the global world?
these things change. when i was in the UK in 2001. all the investment banks were saying the GBP was going to go to 1.1 to 1 vs the dollar. 9/11 kind of reversed that trend. something big can change it in the other direction....hard to tell with a long enough time horizon.
europe is quite nice....i would have a hard time living there though. felt a bit out of place.
Re: #39 - India is currently negotiating a free-trade agreement with the EU - and it may happen sometime in 2008 - probably even before the free trade agreement with the US, which is also being talked about.
This, combined with strong FDI flows into India, could make the INR continue to appreciate relative to the USD in the long term, quite separately from any short-term appreciation. Even a return to the kind of rates Candadai spoke about in #37 - is not beyond imagining, in the sufficiently long term (in my view).
A South Asian Monetary Union (trust me to bring that up!) has already been scoped out, both to hedge against instability in inter-country financial flows, and to serve economic increased transactions resulting from SAFTA. I was surprized to find recently that even countries such as Bhutan and the Maldives have their own currencies - their population, when combined, is less than 1 million people. I can easily see these countries 'rupee-izing' in the first round.
Two things to think about:
1) Two relatively unknown brothers made more than $4 billion on the Bombay Stock Exchange earlier this week. Each. The first $4 Billion in just 20 minutes. With the money they made just on that one day, they could buy out everything both Bhutan and the Maldives make in goods and services in a whole year, and still have more than $2 billion left over. Again, that's just from what they made in a single day on the BSE.
2) India announced $1 million (that's with an 'm') in aid to Bangladesh after the cyclone of November 15. (Why was it denominated in dollars?) And by the purest of chances, the USD touched its lowest point in the recent past - against the INR on November 16, the day this was announced.
not so much lots of browns. more like, my parents like an american now. not sure if i would ever be "european" the same way my parents feel american. i could be wrong though. i guess any place is nice if you go there with a high paying job offer.
There's just something about the ewwro that rubs the wrong way ;).
Absolutely--they already get tax exemption, etc., which we pay for. I always say "sorry, I'm a bit short today," and fork over a $5 or a $10. Never freaking $20.
Make some money: If you think the dollars going down, buy this ETF: FXE
prob will be one of these two, but that will take a long time to happen...
The euro is not meant to be used as a topical ointment
White man's tax in India sucks big time for us low budget tourists, or for the non-Indians who reside there for an extended amount of time, also on a fixed and low budget, while the bada paisa walla rich Indians get in for peanuts! Not fair, not fair at all.
It's plenty fair. You are upset because some 5% of the locals can afford to pay the non-Indian rate and don't? Price discrimination makes plenty of sense when you don't have a tax base that can maintain heritage sites and higher entry prices would deprive locals of their own history. India is not an easy place to navigate and I am on the side of foreign travelers on most issues except this one
So what's the future of Euro?
Looks as if the formation of EMU has made the Euro to fit for fight , a worthy opponent to the dollar.what can ,then,stand in the way of the Euro's ascendancy?
Did anyone catch the bit on CNBC a few nights ago about investing in India?
Gold is high today because of the 7 year commodities bull cycle. Gold prices are at 28 year high. But make no mistake ... GOLD has been a LOUSY investment. If you bought gold in 1980 at $750 you would have to wait 27 years to be in black (to make any profit). Which would be worse than putting the money in bank. If that person had put the money in Dow he/she would have had significant gain.
I think that Gold and other commodities are at their peak and after second half of 2008 next move in GOLD is DOWN for several years. I am putting my money where my mouth is. Lets see what happens !!!!
To update the story at my comment #42, but otherwise slightly off-topic:
India is now lifting the ban on rice exports to Bangladesh, and providing other kinds of assistance and relief after the cyclone.
Also, apropos of the SAFTA issue that I had also mentioned in that comment, the PM signaled India's willingness to undertake "asymmetrical responsibilities" and provide Bangladesh access to its markets without insisting on reciprocity at the recent SAARC meetings. I see this as a good step forward.
India's foreign minister, Pranab Mukherjee is currently in Bangadesh, where he met Bangladesh's Chief Adviser to the Government, Fakhruddin Ahmed.
A monetary union presupposes stable and compatible political systems - none of the countries in the subcontinent qualify, though Bhutan and India come closest to having a stable one.
BD - dictatorship with unpredictable bouts of democracy
Pakistan - ditto
Sri Lanka - authoritarian democracy with occasional streaks of dictatorship
Nepal - embroiled in a tug of war between absolutist monarchy, Maoist communism, and plural democracy.
Bhutan - absolutist monarchy. Has union with India on many affairs - financial, travel, etc. Interestingly, it tracks "Gross National Happiness" instead of Gross National Product, and consequently is a generally happy country :).
Other than Bhutan and India, both countries already having a union, I don't see a subcontinent-wide union feasible unless these other countries evolve stable political systems.
India and Nepal used to have a union in financial and travel matters as well, and the Nepali Rupee is still pegged to the Indian Rupee (painfully for them, because the Indian Rupee is gaining value), but the union was abrogated because of the ease with which Pakistani terrorists got into India via Nepal - no visas needed, no currency problems etc. Now India and Nepal require visas to cross their common border.
On topic, the dollar is still well-valued, thank you very much. A rupee is worth some 2.5¢. A year ago, it was worth 2.3¢. Big deal! Geez, you gloom-n-doomers, talk to me when a rupee is worth a dime, or even a nickel!
I thought Ennis was 2nd gen? Also, the Met IS pay as you go. That doesn't mean you have to pay anything, let alone $20. I often paid $5-7 when I was a student. If I was making more money, then I would have paid more. I think that's fair. I also think the NRI tourist price for desi sites is fair. If you can afford to fly to India, you can afford the $5 to see the Taj.
I wouldn't worry about that happening. I think the weakening dollar, up to an extent, is going to be great for manufacturing to return to the country. Imports are getting more and more expensive. The strength of the Euro in particular is going to be bad for their industry, and they're already aware of this. The US is the largest consumer market in the world - though Chindia are catching up somewhat - and if other countries want to sell here, they can't afford their currencies to be so strong. It's a self-balancing mechanism, so I don't really see the dollar continuing to depreciate beyond a few years before the trend reverses again - exchange rates are invariably cyclical.
While the Rupee has appreciated some against the USD (on account of the US weakness), it has depreciated significantly against all other major currencies. So the story that India's economic growth is leading to a strong rupee doesn't make too much sense, though you'll never find that mentioned in the Indian media.
There is a mean-reverting tendency to all exchange rates, so depending on how far back you look, and what segment of the series you focus on, you can make pretty much any statement you want about appreciation or depreciation. The Indian Rupee buys more USD, more Chinese Yuan (CNY) and more Japanese Yen (JPY), but fewer Euro (EUR) and fewer British Pounds (GBP) than it did five years ago. The British pound has behaved in this period as if it were loosely linked to the Euro, with a strong mean reversion in a fairly narrow band, and its appreciation against the Rupee therefore does not seem independent of the Euro's appreciation against the Rupee.
So the only major currency that the INR has depreciated against - has been the Euro. But: (i)The Euro has gained against every other currency during this period (ii) The Euro is fairly new, so it can be argued that this gain nullifies the original 'novelty discount'. There will also be some short-term real gains in consolidating the Euro monetary union - these perceived gains cannot last for ever, and do not by themselves indicate any powerful long-term productivity gain. So bottom line, I think the fact that the INR has gained against every currency except the Euro over the last five years is quite significant.
To the larger point about a South Asian Monetary Union - first of all, it is on nobody's agenda as the very next thing to do. It will take a good bit of time before things get there. The political harmonization would be nice, but is not essential - more critical is whether the different economies respond to different macroeconomic shocks in roughly the same way. Here the evidence is not unambiguous, but since some amount of macroeconomic convergence is foreseen even by the skeptics, it doesn't matter right at this point in time. For the record, SAARC is commited to a 'South Asian Economic Union' by 2020, and steps along the way include a preferential trade area, a customs union and a free trade area. Those steps will induce considerably more macroeconomic convergence than now exists, and then a true monetary union can come into being. But these same steps will also induce greater harmonization in political and state structures across South Asia, and that will require reform both in India and its neighbors.
The nice thing about the SAMU is that an existence proof - or precedent - exists. During 1860-1940, the Indian rupee was accepted throughout not only South Asia, but also parts of the Middle East, East Africa and South East Asia. And something like that can happen again.
As an aside, I find the persistent, almost xenophobic 'Indian exceptionalism' that comes up often, as in someone's comment above not only incorrect but also geographically inconsistent and powerfully offensive to common sense. This is not the thread to get into that detail though.
One word: 'Amero'
Re:#42 "India is currently negotiating a free-trade agreement with the EU - and it may happen sometime in 2008 - probably even before the free trade agreement with the US, which is also being talked about."
is that a Mini Treaty for europe?
In india,one is aware that so many ingredients and chefs may not improve the quality of "khichiri",(it is something I've never been fond of ,even after 27 years in india)
it's because everyone knows that it's more difficlut to prepare a good meal with 27 cooks than 6.
The issue is that the EU construction process has a tendency to become political :with each nation having its own 'national interest' to safeguard.