Our currency is losing its auction value at the Forex Market and that has been the main concern of most economists. When we see the history of currency valuation, we see that in early era, currency was valued in gold. As economy grew beyond the limits of gold availability, later on, paper currency came into picture.

Then after World War 2, Dollar became the international currency and gold was almost side tracked. Though this arrangement is still in vogue, the reliability of Dollar is gradually reducing and so during 1974 British economists came with the idea of auction valuation of all currencies. That gave birth to the Forex Market. British involvement in the development of this market becomes obvious, as the reference currency, for this market is Sterling and not Dollar for one thing, and other point of attention is that, the main office of this market is in London. Today, auction at the Forex Market decides values of all currencies. Actually, this arrangement British developed to eventually replace Dollar by other valuable currency and ultimately reduce position of Dollar from present status of International currency. However, this attempt seems to have failed and Dollar continues to hold in the international economics.

To continue the status for Dollar as international currency has become superfluous as all currencies at the Forex Market are, treated on par. That means all currencies approved by the Forex Market are international currencies. However, as we know, old habits die-hard, the mindset of many a countries still considers Dollar as an international currency.

Point that we should take a note of is that, since the Forex Market depends on the process of auction to evaluate the currency; speculators have taken over this market already. Moreover, in that, American gamblers, supported by Fed chairperson, Ben Bernanke, are on the forefront. This explains why Dollar remains where it is by the tricks of these expert gamblers. What influences the auction of currencies we should see now to understand, how the market works? Primarily export/import ratio of the country should influence the auction value however; in the Forex Market, other elements are surreptitiously involved such as the private prerogatives of the players, this is similar to the stock market. The private plans of big players often override the effects of genuine cause that is import/export ratio. When we observe the price adjustments of Dollar, this fact becomes very obvious. On the whole, economic condition of USA, as we know is very fragile and under such condition, if it were any other country, the value of the currency of that country must fall but that does not happen in the Forex Market, with Dollar. The only explanation for that phenomenon is the special working of the big players backed by the Fed, working under advice of Ben Bernanke.

Obviously no need to say that the price decided by auction is not true value but one, concocted by the gamblers. All the same, that unreal value continues to rule the market by popular consensus. We see the dangerous shift from real value to virtual value taking place. As I have said in my one, previous article on this blog, the element influencing the “auction value” are sneaky, economists do not make discussion on them, for obvious reason, while giving their opinion on the subject. This trend may land all economy of the world in jeopardy someday, I reckon.

All so-called laws of economics have become outdated and all calculations based on old theories of economics we learn at the colleges have become redundant. The sooner we realize this truth the better for our Indian economics. When we discuss about fall in the value of our rupee all reasons they give are not true considering the new situation of Forex Market. We should understand it but bad part is that our so-called experts are as yet deeply rooted in the old theories of economics. Not all reasons they show are applicable when we see how Dollar holds on its value even though there the exports of USA are not increasing and imports ever increasing, still it does not affect the Dollar. When they talk of GDP, what GDP America has today and still Dollar is strong, the last point they talk of is current account position, what is America's current account position? Even so the Dollar is getting stronger, why so?

As for our currency, the factor of import/export influences the position of rupee. We do not have players same as Americans do, in that Forex Market to push up the currency. The result we see today. I do not know if our Reserve Bank or Finance Ministry has any plans to encourage players to play the way Americans are doing. If not then, we have to suffer since our exports are not going to pick up in the immediate future. Our outdated expertise we must discard and learn to accept the new trend in the international economics; it is gambling based economics and nor real value based economics. Any amounts of export increase we do and reduce imports, if we are not playing at the Forex Market properly even after that our currency may not appreciate. This we have to understand and the early we realize this better it shall be for our economics.

Somebody told me that the American gamblers triggered the fall in our rupee. This I say with reference to the report that a few American retail companies (such as Walmart) want to enter our retail market. Recent visit of Mrs. Clinton (who is working privately for Walmart as per my information) had that reference. By destroying the Rupee, they want to develop stronger base for their investment in India. If this is true then, we should expect further fall in the price of Rupee and our currency may deep to 64 for the Dollar in the near future. Fall in rupee happened because Mamata Banerji offered co-operation to Mrs. Clinton during her recent visit. If she had refused co-operation our rupee was safe. Our politicians are not very prudent; they do not know how their decisions can cause other effects. USA had adopted similar strategy with Japan and many other countries after the WW2. Mamata Banerji is not a politician to handle Washington. As rupee further drops more companies from other countries such as Sweden are venturing to enter our market.

Our experts (?) suggest that fall in GDP and deficit in the current account are other reasons responsible for the fall of the currency but I do not accept those could be valid reasons for the depreciation of our currency. We need players in Forex Market to help rupee if we cannot improve our exports. They must learn something from Americans. Quite a few economists say that subsidies government gives is responsible for fall of rupee; I must reply to this that these economists do not understand why the rupee is really falling. Our people need subsidies and American based companies do not want that, as that hampers their interest, if they come to retail market. I suggest to these so-called economists that they should learn about modern economics based on gambling to understand why rupee is falling.

Know for sure, if we are good at the Forex Market, whatever our imports and exports and whatever the GDP, our currency can remain strong just the way Dollar does.

I suggest visiting my other blogs if interested.

Ashok Kothare for stories

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