“Capital growth without causing a bubble is good for the economy, it creates progress in assets appreciation and inflation, but capital inflows that disrupt this stable progress must be regulated by central bankers, into other sectors and industry, by micro-managing and tweaking the demand and supply, QE should not be seen as a permanent feature of the global economy, it creates too much shock waves across all markets, what can create jobs in the US will cause Africa to go into recession. What can we learn from the solar industry, where both US and China companies go into bankruptcy due to destructive competition? But do you see solar energy in every homes in US and China? What went wrong? Can the situation be overturned? YES. DEFINITELY. Everyone already knows where Oil is heading within 50 years, without the solar industry, everyone will be in big trouble.” – Contributed by Oogle.
Asean Leaders Address Capital Flows Into Asia: Dow Jones
A key topic at this week’s gathering of the Association of Southeast Asian Nations (Asean) in Brunei was the flow of capital into emerging Asia, spurred by global investors’ hunt for yield in one of the world’s fastest growing regions.
The Wall Street Journal asked top Asean officials about the risks of overheating and how they would cope with the tide of money:
Cesar Purisima, Philippines finance secretary, on capital flows into Asia:
“This is a challenge that all emerging markets will continue to grapple with. In the case of the Philippines, we’re coordinating closely — the finance ministry and the central bank — and our desire is to direct these flows to infrastructure investments. That’s why we’re accelerating the processing of our projects, because I think this will allow us to emerge out of this period of global liquidity with improved efficiency and competitiveness of our economy, rather than letting it flow directly to real-estate assets and other financial assets that can create disruptive bubbles.”
Naoyuki Shinohara, International Monetary Fund deputy managing director, on real estate risk:
“I don’t want to speak about specific countries, but the low-income Asean countries tend to enjoy higher growth rates. On average, Asean economies are growing around 5% to 6%, but so-called frontier Asia is growing faster. In some of the economies, credit growth is very high, and we see some heating up of real-estate sectors. Since the growth rate is high, it’s quite natural that those kinds of movements will emerge. I do not think the risk is imminent, but once these things start moving, it is very difficult to unwind. So policymakers should be careful in monitoring how the market develops, how the economy grows, and take necessary measures as the situation develops.”
Tharman Shanmugaratnam, Singapore finance minister, on overheating risks:
“I think for now we now can cope with the capital flows. Macroprudential policies are now part of the toolkit of policy management in all our economies. It means occasionally unconventional measures using stamp duties, tightening your loan-to-value ratios for the property market in particular, and things which 10 years ago were unconventional are now becoming conventional because of the reality of ample liquidity.”
Abd Rahman Ibrahim, Brunei second finance minister, on monetary easing:
“The massive monetary easing in 1/8major industrialized 3/8 countries can have unintentional adverse impacts on the region. But we’re confident that our central bank colleagues have monitored this issue closely and have addressed potential vulnerabilities.”
Krirk Vanikkul, Bank of Thailand deputy governor, on the rush of money into Asean countries from quantitative easing in advanced economies:
“Let’s say if the U.S. is going to do QE2 for another two years, if Japan is going to do something as well, if Europe is not seen to be settled and everyone is pumping the money — the Fed, the Bank of England and various other places — where would the money go? So it seems to be a long-term trend, because they say it’s going to be two years, it’s not going to be two months from now. You have to live with it … The world may not be fair but you have to get used to it.”
Amando Tetangco, Bangko Sentral ng Pilipinas governor, on growth in advanced economies:
“Growth in the advanced economies has not been convincingly established, and therefore it’s likely that the advanced economies will continue to follow easy monetary policy. Of course, that has implications for capital flows, particularly to emerging markets — including those in Asia — in terms of the liquidity implications, the exchange-rate implications, the inflationary asset-bubble implications. So countries in Asia have to be able to address the potential negative effects of these developments, and I think we have been able to do precisely that.”