Great Forex-pectation (1)

Puspa is back and now with people's high expectation on her expectation of foreign exchange. As I was told, many economists share Puspa's frustration: that you have to know things, no matter what. Many times, as a result, we see the so called 'pengamat ekonomi ' or economic observers says stupid things on TV, just because they can't say they don't know in response to the journalists' questions. Or, maybe because they don't know that they don't know. All questions are good, nonetheless. At least they get us thinking. Puspa knows that she doesn't know some things but she keeps thinking about them. She is sharing with us her experience with one case of currency-financial issue, in two pieces. Later, she will continue talking about this 'forex-tation' in the context of Asian crisis. You will see that she actually knows more than she thinks she doesn't know. Enjoy.
- Manager

What can one expect an economist, who happens to work in an institute that conducts ‘strategic’ and ‘international’ studies, to be able to say about the exchange rate and the likelihood of another crisis?

Sometimes, a lot more than what she can handle.

For some reason, I find that in Indonesia, people expect a lot out of economists. Peers, friends of friends, distant relatives, colleagues of parents, upon knowing (or insisting) that I am an (aspiring?) economist, would often pose interesting questions to me. Sometimes, personal queries come from phone calls, “ Hey, did you see the paper today? The Rupiah strengthened considerably…I think I am going to buy myself some (US) dollars now. But, wait…do you think that’s wise? Should I wait for a couple of more months? What’s the value gonna be in a few more months? “

Sounds like a normal ‘I-wanna-have-your-opinion-so-let’s-talk’ kind of question, no? But wait, it goes further, “What? You don’t know? Come on, don’t you have any leads as to what the exchange rate is going to be in 3-4 months? Dude, you’re working in a strategic institute, don’t tell me you don’t have any leads about the exchange rate?”

Mind you, owing to the fact that this institute’s name contains the word ‘strategic’, people sometimes expect great ideas from their economists, especially on foreign exchange…You know, like ‘Great Forex-pectations.’ ;-)

My reply was, “Dude, I cannot tell you what the exchange rate is going to be because : (a) the exchange rate is market determined and I’ll be damned if I claim to have perfect knowledge on how the market’s going to behave like and (b) if I can predict with utmost accuracy on exchange rate movements, I would be rich person already by now! Besides, I kind of subscribe to the view that exchange rate movements follow a random walk, and thus predicting would be pointless.

Still along the lines of currencies and financial issues, a few days ago, I received another spontaneous question ...

(To be continued...)