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Capital inflows 'may destabilise Asia'
22-10-2010, 07:15 AM.
Post: #1
Capital inflows 'may destabilise Asia'
Oct 22, 2010
Capital inflows 'may destabilise Asia'


STRONG inflows of capital into Asia, coupled with rising inflation and climbing asset prices, are threatening to destabilise regional economies, the World Bank warned yesterday.

Already, the liquidity streaming into countries like Singapore, South Korea, Thailand and the Philippines has sent their currencies soaring and fuelled fears of property and stock market bubbles.

This complicates Asia's existing problem of how to maintain high growth rates amid a sluggish recovery in the developed world, said Mr Vikram Nehru, the World Bank's chief economist for the East Asia and Pacific region.

He is in town to launch the bank's latest twice-yearly update on economies in his region, and said the current situation of huge capital inflows is similar to that preceding the 1997 Asian financial crisis.

There are indicators that some Asian economies are overheating, and central banks need to calibrate their policies to address both inflation and capital flows.

But he said policymakers so far have tackled these problems well, with calibrated and customised measures.

'We don't see any reason for deep worry but we see incipient risks, rising risks,' he told about 20 participants at a breakfast meeting hosted by the Institute of Policy Studies at Orchard Hotel.

FIONA CHAN


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22-10-2010, 08:22 AM.
Post: #2
RE: Capital inflows 'may destabilise Asia'
Its strange the World Bank can see all the risks in the developing world especially, East Asia. Yet they hv not a single clue that the Housing crisis could lead to such a blow up given so long a time of analysis.
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22-10-2010, 08:49 AM.
Post: #3
RE: Capital inflows 'may destabilise Asia'
(22-10-2010, 08:22 AM)arthur Wrote: Its strange the World Bank can see all the risks in the developing world especially, East Asia. Yet they hv not a single clue that the Housing crisis could lead to such a blow up given so long a time of analysis.

I guess things always look clearer on hindsight! Tongue
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22-10-2010, 08:49 AM.
Post: #4
RE: Capital inflows 'may destabilise Asia'
Dunning-Krueger effect at work?

What is it? In a short one-liner (from Wikipedia):
The Dunning-Kruger effect is a cognitive bias in which an unskilled person makes poor decisions and reaches erroneous conclusions, but their incompetence denies them the metacognitive ability to realize their mistakes.

Layman ver:
Someone being too stupid to realise he/she's stupid.

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22-10-2010, 09:08 AM.
Post: #5
RE: Capital inflows 'may destabilise Asia'
Capital inflows 'may destabilise Asia'
but Capital outflows 'will destroy Asia'

Better to destabilise than destroy.

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22-10-2010, 09:18 AM.
Post: #6
RE: Capital inflows 'may destabilise Asia'
(22-10-2010, 09:08 AM)yeokiwi Wrote: Capital inflows 'may destabilise Asia'
but Capital outflows 'will destroy Asia'

Better to destabilise than destroy.

I guess the author's concern here is that the capital inflows may distort the true asset quality present in these economies, as prices keep rising due to inflows of "hot money".

I don't view capital outflows as "destroying" Asia per se, but more of a re-balancing in terms of showing up the true and fair value of assets without the "bubble" factor. Of course, there will be a lot of short-term pain, but perhaps it is necessary for long-term stability?
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22-10-2010, 07:46 PM.
Post: #7
RE: Capital inflows 'may destabilise Asia'
(22-10-2010, 08:49 AM)kazukirai Wrote: Dunning-Krueger effect at work?

What is it? In a short one-liner (from Wikipedia):
The Dunning-Kruger effect is a cognitive bias in which an unskilled person makes poor decisions and reaches erroneous conclusions, but their incompetence denies them the metacognitive ability to realize their mistakes.

Layman ver:
Someone being too stupid to realise he/she's stupid.


That would be one of the most insulting term I could used to describe someone.
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