Re: In Defense of Capital Controls

[Harry Veeder <eo200@xxxxxxxxxxxxxxxxxxx>]

> From: Leigh Harkness <Leigh@xxxxxxxxxxxxxxxxxxxx>
> Reply-To: Leigh Harkness <Leigh@xxxxxxxxxxxxxxxxxxxx>
> Date: Mon, 02 Jun 2003 21:29:40 +1000
> To: Harry Veeder <eo200@xxxxxxxxxxxxxxxxxxx>, post keynesian thought
> <pkt@xxxxxxxxxxxxxxxx>
> Subject: Re: In Defense of Capital Controls
>
> Harry
>
> Asking the question whether capital flows are a good or bad thing is like
> asking whether fire good or bad.   It is neither good nor bad.  It depends
> what environment it is in.

That is one way of looking at it.

Another is to say fire is both good and bad, and it is the right environment
which  brings out the good, and the wrong environment which brings out the
bad.

Or fire is essentially good, but the wrong environment can make
fire seem bad.

Or fire is essentially bad, and any environment which makes fire
seem good is a deception.


The trouble with the position that the goodness or badness of fire is
relative to the context in which it burns, is that the cause of ignition is
left to supernatural forces. e.g. See the movie _Quest for Fire_.



> In a floating exchange rate environment it can cause exchange rate
> volatility.  In a fixed exchange rate environment it can cause the money
> supply and foreign reserves to fluctuate.  Also, it is possible to create an
> economic environment where capital flows would be a stabilising force.
>
> We need to understand our economic environment and its limitations before we
> start pronouncing normal economic activity as either good or bad or just
> accepting it as part of our environment and ensuring that we have systems in
> place that allow it to flow without disrupting our economies.
>

Harry Veeder

>
>
>
> ----- Original Message -----
> From: "Harry Veeder" <eo200@xxxxxx>
> To: "post keynesian thought" <pkt@xxxxxxxxxxxxxxxx>
> Sent: Sunday, June 01, 2003 9:57 PM
> Subject: Re: In Defense of Capital Controls
>
>
>> If I may interject.
>>
>> There are two extreme starting positions with respect to the movement of
>> capital.
>>
>> 1) The movement of capital is essentially a good thing,
>> with some exceptions.
>>
>> 2) The movement of capital is essentially a bad thing,
>> with some exceptions.
>>
>> A call for 'capital controls' is consistent with the first position.
>> However, if one supports the second position, a call capital controls
>> will be viewed with cynicism and suspicion.
>>
>> Harry Veeder
>>
>>
>>
>>> From: Gary Santos <evs@xxxxxxxxxxxx>
>>> Reply-To: Gary Santos <evs@xxxxxxxxxxxx>
>>> Date: Tue, 27 May 2003 20:55:21 +0800
>>> To: Tijani Mohammed <sheutij5@xxxxxxxxx>, EGroup PKT
> <pkt@xxxxxxxxxxxxxxxx>
>>> Subject: Re: In Defense of Capital Controls
>>>
>>> Shehu,
>>>
>>> It seems to me that capital controls should be part of any developing
>>> country's tools. These countries have soft currencies and, by that fact,
>>> will be subject to balance of payments problems and impairment of
> central
>>> bank balance sheets in a regime of liberalized capital flows. In the
>>> Philippines, I saw the foreign funds get out at P26.50 as the stupid
> central
>>> bank governor held fast to the "floating within a band" policy. Now that
> was
>>> patently wrong from the point of view of those involved in the stock
> market.
>>> When dealers see a big seller out there, they know that the stock price
> will
>>> dive as he matches the bids. Result: All dealers get out of the way and
> the
>>> steep slide in the Index shows that. The Banko Sentral should have
> followed
>>> suit -- let the foreign funds get out at lower and lower exchange rates
> just
>>> as they had to get out of the stock market at lower and lower prices.
> Serves
>>> them right for being fair weathered friends.
>>>
>>> "Second, the process of internationalization of capital has been
> proceeding
>>> as a strategic component of managed world trade." This seems to imply a
>>> cabal and a conspiracy. I have a hard time accepting this as is. The
> dollar
>>> tends to be supported by those who export to the US. It is an integral
>>> benefit to the US because its currency is used as reserves. So, I don't
> know
>>> about a cabal.
>>>
>>> Gary
>>>
>