The exchange rate itself discounts purchasing power of that currency.You can't double discount the purchasing power.Say, In start, a dollar in USA how do I compare it with Indian rupees to exchange it? Obviously the cue available is what the two currencies can buy at same place with their own experience.The other rates as fixed by banks are artificailly controlled by stupid governments and these economists to cause problems.You can't remain under water for whole life.You gonna get exposed.The dollar to rupee exchange rate has to be equal to the buying power.This is off the cuff expressed as Big Mac index.That is in similar type of shop and location what is cost of McDonald burger in NY and London and delhi.That ratio should be PPP and exchange rate should fall in ine with that.But govt manipulate it.By keeping Indian rupee low we are exporting our natural wealth and precious outside to USA and other countries.This is also expressed as Domestic resource cost.but by artifically clamping exchange rates these governemtns manipulate things and all ratios go haywire.
RE:Foolish economists and PPP jargon-The reality
by Prof R K Gupta-India on Oct 04, 2007 11:49 PM Permalink
Dude.Dont comment if you dont know subject.And have some respect for teachers.That is why Indian society is going down. Read this model: The purchasing power parity (PPP) theory was developed by Gustav Cassel in 1920 The exchange rate between two curremncies finally land at PPP value.have to there is no other way to rate a currency in terms of other?is it?then give me the way?forget the books and what government says.The excjange rates are manipulated by economists and governments to help one section or to hide fianncial weakness or to have short term gain of currency reserves.But in long run it damages our health.We as country loose by exporting wealth (material,money or manpower cost)at artifically increasing exhange rate.This ofcourse assumes that india for example quotes in dollars and not rupees and is in no psotion to do so.Like today.Why indianexperters cant quote in rupees?They cant as buyer (USA)dominates and has alternatives.
