The Whomping Rupee

The big news in Economics and Sociology seems to be the Rupee taking a nose dive into the Indian Ocean. Yet, no one knows why the Rupee is falling, and fewer understand why it matters (yes, I know that would make it a negative number of people, but that’s my point).

If you don’t know what life is like under the Rupee, think of your 401(k) in 2008; many stocks were worth less than the Rupee back then.

Does it matter economically? Not really. India is part of the BRIC economy, and China is down 3% on it’s GDP. That may not seem much but when China’s economy is $7 Trillion (50% of the U.S.), 3% is a big deal. People are pouring money into China to buffer its investing, which means that they won’t pour as much into other BRIC nations. Makes sense. Plus India is in a sweet spot with foreign debt to GDP just shy of 25% – the U.S. should be so lucky! And India handled the 2008 recession well:

082013krugman2-blog480

Thanks to Dr.Krugman for the chart, because I was too lazy (a-hem, I mean “busy”) to run the data myself.

Where the real issue is, is in the Sociology. India is a poor country separated by stark class differences. The most people that are going to be effected by a free-falling Rupee are the upper class. The “less than” upper class are still going to be “less than” upper class, no matter what they do (or don’t do). Layoffs? Maybe, but there will be little “class” loss from people who don’t make that much to begin with. It’ll be more about “status” for the majority of the Indian people. That’s sad all by itself, without the economics thrown in.

Chances are what ever happens to the Rupee, it’ll recover as soon as China does. What the BRIC Nations have never understood, is that they are first and foremost, BRIC Nations – economies that are interdependent on each other. In the meantime, let the panic, and whomping, begin.

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