The doomsayers are back!

Rangga Cipta
Sep 8, 2018 · 2 min read

Most people look at the level of currency as if they go back to memorable places they have visited before. Some of them are specials bringing back good or bad memories. Bad memories bring back fear, teasing you to warn people around you. That seems natural showing that you care about them. But sometimes it makes you look cool to have experienced something miserable, and survived.

As Rupiah exchange rate breached the 15,000 level in the first week of September 2018, doomsayers started to resurface and recall the fear of 1997–1998 Asian Financial Crisis. The logic behind doomsayers tale is if Rupiah is back to the level where Indonesia once had a currency crisis, then it’s suppose to happen again. Of course they intentionally ignore any other contradicted economics facts as fear clouds their judgement.

I won’t talk much about economics here but the point is that you might want to check the rate of depreciation of a currency rather than it’s level to analyze what‘s happening in an economy. Frankel & Rose (1996), for example, defines what characterize currency crises in developing countries. You can also check my piece here about Rupiah depreciation which has more economics content.

Try google old news headlines when Rupiah breached what so-called the psychological levels and you might find similarity. They were all exaggerating and all the doomsday scenario mentioned in the news, did not happen. No you don’t need to be a savvy technical analyst to find those psychological levels; create a list of number starting from 10,000 with multiplication of 1,000.

I am not that kind of nationalists who tell only good stuffs about their country but doomsayers really disgust me. And I am not saying that predicting a crisis is something that someone not supposed to do, like this guy correctly did in 2005, but if the same kind of people make a wrong doomsday prediction without disclosing their methods over and over again like it’s some kind of a hobby, then maybe it is their mind that is in crisis, not the economy.

But maybe it’s rational to be a doomsayer. Rather than building credibility slowly by publishing good research or fair yet mundane comments, predicting crisis could be a perfect shortcut, if it’s correct. If it’s wrong, people tend to forget and they are too lazy to google the mispredictions, right?

Rangga Cipta
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