Such a lovely episode! The exchange rate bit reminded me of what I call the international beer-drinking problem, an interesting problem we came across in one of the classes forced upon us in the course of our MBA. Paraphrasing a bit, here goes: There is a man named Mani, who lives in the southern part of India, just across from Sri Lanka. He has a boat, and the skills to cross the strait at will. At the time of this story, the exchange rate between the Indian rupee and the Sri Lankan one is almost equal. But because of reasons of national pride, the Indian government will give you 110 Sri Lankan rupees for 100 Indian ones. Not to be outdone, the Sri Lankan government has similar nationalistic ideals. It will give you 110 Indian rupees for 100 Sri Lankan ones. Mani loves this situation. Every morning, he goes to the bank in India, changes 100 Indian rupees for 110 Sri Lankan ones, crosses over to Sri Lanka in his boat and has a beer for 10 Sri Lankan rupees. The beer consumed, and the requisite burp burped, he goes to the Sri Lankan bank, changes his 100 Sri Lankan rupees into 110 Indian ones and returns home to India. He buys a beer for 10 Indian rupees, and goes to bed, tucking away his 100 Indian rupees securely in his mundu. Next morning, it's the same thing. Another glorious day and another two beers for Mani. The question is, who is paying for the beer?
I absolutely love the way the ideas are presented Going from first principles and yanking from the idea of "price of money" and how we shouldn't mess with prices. Which is also a great segue(perhaps for a later episode), into how central banks in sophisticated economies "shape" the interest rates. They do not coerce (unlike 1970s India), rather they set the terms of the least risky, most liquid player in the debt market (central bank) to borrow/lend at the lowest maturities. Any and all players are free to break their rules of self interest and economics to ignore that number. This in essence is, the "cost of risk taking". So now the conundrum is, should central banks actively manage the interest rates? 😊 Perhaps, you can also weave in, why when government borrows excessively - it messes with the "cost of lending" in overt(seen) and covert (unseen) ways - and hence should be assiduously avoided (Jalan Committee Report reccos IIRC)
I always found it interesting what could be and what should be controlled in an economy by the government. I am glad I found your content. Immediately following you on all your social I can find.
Ajay Shah and Amit Varma are gradually breaking the entrenched bureaucratic mindset of Indians, one podcast at a time. Subconsciously, many of us still carry a socialist mindset! Long live freedom-damn it! Hi Amit, I’d love to hear your thoughts on the Argentine economy and their new president, anarcho-capitalist Javier Milei, along with his intriguing economic policies. Could India learn something from Argentina’s experience?
Milei seems awesome, and I love everything I've heard. But I haven't studied Argentina enough, or followed recent events, to be able to comment with any knowledge.
Today, China has become the largest producer of steel. But it is being said that, Chinese workers get lower wages than Indian workers. Then why are Indian workers always protesting, but not Chinese workers?
Thanks for this episode. Waiting for the next one now. It'd be great if you can cover the Austrian business cycle theory in that as well. Not sure if it is directly relevant or not.
The argument that is usually people make regarding USD exchange rate is that it controls the price of energy. The energy market is distorted due to printing of petrodollars....so by pegging the rupee usd exchange rate one is keeping the price of energy the same.
There is no way for a central planner to get these things right. The market has to discover the true level and compensate for a thousand different things. How would a central planner know what is the correct rate ? Keep it too low and people lose value on their money keep it too high and you are hurting exports. It is the market responding to a thousand different factors that has much more of a chance to find an appropriate level than a central planner
Hey Amit, since you mentioned your show notes not having any error Please check TSATU episode 351 and show notes entry 26. I laugh every time I see that.
At 42:36 I wonder what would happen if a government made a good policy that people don't like for whatever reason. The party in power will fail in politics but will win in policy. How can we incentivize the people running political parties so that they choose to win in policy instead of politics if the moment arises?
Hey, not sure if this will reach Amit or Ajay Shah, but I just wanted to drop a note. "The Seen and the Unseen" and "Everything is Everything" have been my constant companions-whether I’m driving, working out, or just going about my day. I’m a Malayali, and at this point, Amit’s voice is competing with Yesudas for the one I’ve heard most in my life! I’ve heard Amit mention his time reading Marx and leaning left politically. And while I appreciate the balanced view he gives credit to the BJP for what they've done right, I do feel like the Left doesn’t get quite the same treatment. I haven’t seen him engage with leftist intellectuals or historians to get that perspective. Totally up to you guys, but as a fan, I think it’d be amazing to hear Amit in conversation with someone like P. Sainath or maybe an episode on Kerala’s economic model. Just a thought!
surprising that you are telling Amit gives credit to BJP in an episode where he has taken an explicit potshot at Modi :-) I would say, Amit has anti BJP bias, which he tries not to bring out, to keep the podcast politics free, but it comes out if you listen carefully.. especially if u think what has been unsaid along with what has been said
Such a lovely episode! The exchange rate bit reminded me of what I call the international beer-drinking problem, an interesting problem we came across in one of the classes forced upon us in the course of our MBA. Paraphrasing a bit, here goes:
There is a man named Mani, who lives in the southern part of India, just across from Sri Lanka. He has a boat, and the skills to cross the strait at will. At the time of this story, the exchange rate between the Indian rupee and the Sri Lankan one is almost equal. But because of reasons of national pride, the Indian government will give you 110 Sri Lankan rupees for 100 Indian ones. Not to be outdone, the Sri Lankan government has similar nationalistic ideals. It will give you 110 Indian rupees for 100 Sri Lankan ones.
Mani loves this situation. Every morning, he goes to the bank in India, changes 100 Indian rupees for 110 Sri Lankan ones, crosses over to Sri Lanka in his boat and has a beer for 10 Sri Lankan rupees. The beer consumed, and the requisite burp burped, he goes to the Sri Lankan bank, changes his 100 Sri Lankan rupees into 110 Indian ones and returns home to India. He buys a beer for 10 Indian rupees, and goes to bed, tucking away his 100 Indian rupees securely in his mundu. Next morning, it's the same thing. Another glorious day and another two beers for Mani. The question is, who is paying for the beer?
Have been a fan of EIE since the first episode and do eagerly look forward to Fridays for each new one.
Ajay Shah has god level knowledge + his explanation makes it more interesting.
If God had a TH-cam account, She'd reply here with a namaste emoji.
@@amitvarma 🙏 Let there shall be Freedom!
@@amitvarma🙏🏾 God Complex Activated
A lot of intuition embedded in this episode. This one’s a masterclass.
One of the finest episodes, Thank you!
I absolutely love the way the ideas are presented
Going from first principles and yanking from the idea of "price of money" and how we shouldn't mess with prices.
Which is also a great segue(perhaps for a later episode), into how central banks in sophisticated economies "shape" the interest rates. They do not coerce (unlike 1970s India), rather they set the terms of the least risky, most liquid player in the debt market (central bank) to borrow/lend at the lowest maturities. Any and all players are free to break their rules of self interest and economics to ignore that number. This in essence is, the "cost of risk taking". So now the conundrum is, should central banks actively manage the interest rates? 😊
Perhaps, you can also weave in, why when government borrows excessively - it messes with the "cost of lending" in overt(seen) and covert (unseen) ways - and hence should be assiduously avoided (Jalan Committee Report reccos IIRC)
I always found it interesting what could be and what should be controlled in an economy by the government. I am glad I found your content. Immediately following you on all your social I can find.
Ajay so cutely says hinglish line ending with "na" , 50:03
All of this is fine. When are we getting an episode on Bengali economists and why they’re toxic?
Exchange system is a feedback system in itself
Ajay Shah and Amit Varma are gradually breaking the entrenched bureaucratic mindset of Indians, one podcast at a time. Subconsciously, many of us still carry a socialist mindset!
Long live freedom-damn it!
Hi Amit, I’d love to hear your thoughts on the Argentine economy and their new president, anarcho-capitalist Javier Milei, along with his intriguing economic policies. Could India learn something from Argentina’s experience?
Milei seems awesome, and I love everything I've heard. But I haven't studied Argentina enough, or followed recent events, to be able to comment with any knowledge.
@@amitvarma Fwiw, I am desperately waiting for this episode as well. Esp. after Milei's speechs in Davos and Stanford.
Today, China has become the largest producer of steel. But it is being said that, Chinese workers get lower wages than Indian workers. Then why are Indian workers always protesting, but not Chinese workers?
Love the episode ❤
Your low views are really criminal. I really hope your viewership expands by leaps and bounds
One needs to think, & people hate it.
Lol the channel has default dp which should tell you how much effort Amit has put into marketing this
It now has, after your comment @@kifilshah
True..
Ajay sir,
Desh badlega. Haar nhi maanenge, raar nhi thaanenge.
Discussion after one hour on how the powerful manipulate the system is worth in the context of Monopoly and monopsony capitalism.
Now I am yearning for a chat among Amit, Ajay and Raghuram Rajan😁
Thanks for this episode. Waiting for the next one now. It'd be great if you can cover the Austrian business cycle theory in that as well. Not sure if it is directly relevant or not.
Ep 65 to 70 were recorded as one burst a few weeks ago.
The argument that is usually people make regarding USD exchange rate is that it controls the price of energy. The energy market is distorted due to printing of petrodollars....so by pegging the rupee usd exchange rate one is keeping the price of energy the same.
This is deep. The price of petrol in pumps across India is not static anyway. So, what are they trying to stabilize?
There is no way for a central planner to get these things right. The market has to discover the true level and compensate for a thousand different things. How would a central planner know what is the correct rate ? Keep it too low and people lose value on their money keep it too high and you are hurting exports. It is the market responding to a thousand different factors that has much more of a chance to find an appropriate level than a central planner
Hey Amit, since you mentioned your show notes not having any error
Please check TSATU episode 351 and show notes entry 26. I laugh every time I see that.
Lol, well spotted!
Would pay 500 bucks for this podcast. Why is this information free, I don’t understand.
Excellent discussion. Very informative.
While we think of FERA, we shouldn’t forget COFEPOSA. That created criminals. Mary Shelly’s frankensteins monster comes to mind. IFKYK ;)
At 42:36 I wonder what would happen if a government made a good policy that people don't like for whatever reason. The party in power will fail in politics but will win in policy. How can we incentivize the people running political parties so that they choose to win in policy instead of politics if the moment arises?
Peak Content
Exchange rate regime is bank govt controlled in central asia countries
Nice
Played the video twice and still did not hear enough and clear why is 1 Indian Rupee equal to 1 US Dollar is better than 100 INR for 1 USD.
Can the exchange rate ever be zero?
Hey, not sure if this will reach Amit or Ajay Shah, but I just wanted to drop a note.
"The Seen and the Unseen" and "Everything is Everything" have been my constant companions-whether I’m driving, working out, or just going about my day. I’m a Malayali, and at this point, Amit’s voice is competing with Yesudas for the one I’ve heard most in my life!
I’ve heard Amit mention his time reading Marx and leaning left politically. And while I appreciate the balanced view he gives credit to the BJP for what they've done right, I do feel like the Left doesn’t get quite the same treatment. I haven’t seen him engage with leftist intellectuals or historians to get that perspective.
Totally up to you guys, but as a fan, I think it’d be amazing to hear Amit in conversation with someone like P. Sainath or maybe an episode on Kerala’s economic model.
Just a thought!
surprising that you are telling Amit gives credit to BJP in an episode where he has taken an explicit potshot at Modi :-) I would say, Amit has anti BJP bias, which he tries not to bring out, to keep the podcast politics free, but it comes out if you listen carefully.. especially if u think what has been unsaid along with what has been said
This is called bullshit,exchange rate dosent mattera ,lol , thia means venezuela is a great place