Of confidence and coconut trees

January 31, 2009

“Confidence grows at the rate that a coconut tree grows, but confidence falls at the rate that the coconut falls,” Montek Singh Ahluwalia, deputy chairman of India’s Planning Commission, told a panel in Davos.

He also indicated that India’s decision not to float its currency and to build up massive reserves was correct, noting that this gave it a cushion during the downturn.

“Floating (currencies) would be fine, if that was what was meant, but what they mean by floating is crashing upwards and crashing downwards.”

John Lipsky of the IMF said the answer was a better international liquidity facility to give surplus producing nations the confidence that cash would be there if they did float and were hit by volatility.

He’s right though it would have to be a very big fund indeed. But if the lesson of the last five years is that everyone should export like heck and build up reserves we are going to have a battle on our hands and a long, deep downturn.

James Saft is a Reuters columnist. The opinions expressed are his own.

4 comments

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Confidence Coconut is also difficult to break! Thanks Mr Ahluwalia. This strategy i guess can also work for individuals while saving in traditional instruments and buying while the markets are low ! Sound strategy – any one can place but also the implementation and not budging for pressures on the way is also very critical. Sir would love to hear more on strategies individuals should follow at this time for their future. Regards

Posted by Ramgopal Sista | Report as abusive

I believe a country’s confidence can only come from its citizens’ confidence. And where are the citizens’ reserves in Mr. Ahluwalia currency strategy? They have vanished in the emptiness of paper debt instruments. Each of us must now rebuild our wealth and our countries’ international confidence. But this time, let us learn to hold our wealth more solidly. The middle-class should hold gold reserves, just as our governments do. If each middle-class household bought just one ounce of gold per year, we would skyrocket the price & monopolize the gold market in just a few years. Now who would be feeling confident?

Thanks Mr. Ahluwalia-ji. Your strategy is the best in last 60 years of India. After American, Japanese and German economy failure, everybody wants to book profit from India and China. When world is looking at India as a big market, only your strategy can save Indian economy. Somebody feels some barriers, they started to criticize government policy.

Posted by A.Y. | Report as abusive

good going so far.
only let good sense prevail and do not plllllllleeeeeeeeeaaaaaaasssssssssseeeee eeeee for the sake of the greedy builders, give them any sops. we buy stocks at high prices and when they fall we have to live with it. same should be with the builders. if they bought land banks at high prices, let them face loss and sell properly at reasonable prices, not at the inflated high proces that they want to. these high prices are what are hurting the common man the most.

Posted by eternal | Report as abusive