Monetary Integrity in an Age of Global Shocks
By Hrushabh Mishra
As the U.S. Federal Reserve continues to hike interest rates in 2025, central banks around the world — especially in developing economies — are under pressure to respond. But what would someone like Thomas Sowell, the renowned economist and sharp critic of economic illusion, say to India’s Reserve Bank?
Here’s a fictionalized message, inspired by Sowell’s hard-nosed realism and grounded wisdom:
🗣️ “You Cannot Escape Reality — You Can Only Delay the Consequences.”
Governor,
Let me be blunt. You are not the U.S. Federal Reserve — and you don’t need to be. But you are the steward of India’s monetary stability. That is responsibility enough.
When the Fed raises rates, capital flows away from emerging markets like India. The rupee weakens. Inflation lurks. Panic spreads.
The reflex is always the same: intervene, protect, postpone. But this is not policy. This is denial.
A weak rupee is not your enemy — it is a messenger. It tells you something’s off: that foreign investors are skeptical, that global conditions are tightening, and that your policies are now under a microscope.
Don’t burn foreign reserves trying to “fix” the exchange rate. Don’t hold interest rates low to avoid headlines. Markets can smell fear — and they punish it.
If the rupee must fall, let it fall gradually. If interest rates must rise, raise them with clarity and conviction. Short-term pain now avoids long-term erosion of monetary trust.
And above all: tell the truth.
Inflation isn’t magic. It’s not fate. It’s not “greed.”
It’s the result of decisions — or indecision. Of too much money, too little discipline.
Your job isn’t to “rescue” the economy every time markets wobble. Your job is to anchor the value of money so that entrepreneurs, workers, and savers can plan with confidence.
Be the adult in the room — even when no one wants to hear it.
History rewards those who defend credibility. It forgets those who chase popularity.
🧭 Final Thought for My Readers
This fictional address isn’t just about India or Sowell — it’s a reminder that sound money isn’t an abstract idea. It’s what determines whether a household can plan for the future, whether a business can invest, and whether a country earns global trust.
As India navigates global headwinds, let’s hope our monetary leaders choose clarity over comfort — and principle over politics.
📚 References & Sources
Sowell, Thomas. Basic Economics (5th ed., 2014). Particularly his discussions on inflation, interest rates, and monetary policy in Chapters 9–12.
IMF Working Paper (2017): “Spillovers from U.S. Monetary Policy to Emerging Markets”, IMF WP/17/210
➤ https://www.imf.org/en/Publications/WP/Issues/2017/09/29/
Reserve Bank of India Bulletin (2021): “Spillover Effects of U.S. Monetary Policy on India’s Financial Markets”
➤ https://rbi.org.in/scripts/BS_ViewBulletin.aspx
World Bank Data: India’s real income per capita, GDP growth vs Fed rate periods
➤ https://data.worldbank.org/indicator/NY.GDP.PCAP.KD?locations=IN
Ghosh, A., & Rajan, R. (2007). “Developing countries’ exposure to U.S. interest rate shocks”
➤ Published in Journal of International Money and Finance
The “Taper Tantrum” (2013) case study:
➤ Eichengreen & Gupta (2015), “Tapering Talk: The Impact of Expectations of Reduced Federal Reserve Security Purchases on Emerging Markets,” World Bank Policy Research Working Paper 6754
