Capital Flows: Capital flow purists are damaging the National Interest.

One of the “beliefs” of capital free flow purists is that capital flows are like the wind and if they get in the mood to move there is nothing that man nor government can do to stop them.

For the purist regulating the movement of capital is unnatural and doomed to fail because like the ‘wind’ capital just wants to flow and bring joy to all mankind.

This of course is just one more bit of hogwash where a defective and damaging state of affairs is characterized as the natural order to deflect proper discussion of why and how the situation should be fixed.

The links above show that ‘capital flows’ can be regulated without much difficulty if a country is minded to do so. China is sticking plugs in the ‘capital flow’ conduits faster than a small Dutch boy can plug a few dykes.

It is not as though there is any lack of understanding of the measures that are employed to shift capital illegally.

If capital flows could not be ‘managed’ then we would not have the problem of mercantalism where one country seeks to manipulate their relative exchange rate by exporting more capital than they import. Mercantalism simply would not work if the country exporting capital had no ability to regulate the capital inflows that would otherwise neutralise the capital export currency manipulation strategy.

The last forty years and the business models of Japan, Germany, Korea, etc etc demonstrate that managing capital flows is a doddle.

Locally it looks like there may be room for Penny Wong to back off from her wrong headed desire to wedge the witless Mr Robb from the right (and poke a stick at the Nationals) and argue for even faster unproductive exchange rate manipulating capital inflows.

Mr Robb like any good ideological obsessive (and his former leader) is out on the hustings, clanking his neo-liberal chains and whinging that the government is showing some signs of reconsidering his massive nation wide “garage sale” of Australian assets to our trade rivals.

Take the hint Penny – the last thing the ALP needs is to participate in a bidding war in Mr Robb’s nutty and clueless neo-liberal ideological obsessions.

To read the original version of this comment in the original context click this link. (link maybe locked – but there is a free trial available).

Categories: Macrobusiness

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s