It has not been a good year for emerging markets or their currencies, but the drama this week is concerning. It started with the Indian Rupee continuing its daily march to new record lows and by Tuesday was witnessing the Pakistani Rupee’s stellar dive, thanks to the announcement of another IMF bailout. It makes you wonder: what’s going on?
The answer short answer is: problems with current account balance deficits. Since that’s an answer that leaves a lot to be desired, Ed and Scott dive deeper into the economics behind these problems. They discuss whether the situation is as bad as everyone seems to be suggesting, and what, if anything, can be done about it.