Re: speculation, banks, etc.

["Antony joseph" <antonyj@tm.net.my>]

SS wrote:

> a) It is not possible to provide an efficient system for curbing what
> you call speculation. You can only do so at the expense of curbing
trade
> and free flow of information; thus giving undue advantage to some who
> possess inside information.
>
> b) There is no way to determine whether a particular investment/ trade

> is speculative. Second, so-called 'speculation' is beneficial and not
> harmful. I dealt with at length at some point in time. Else, simply
> pick up a good book on international finance, corporate finance, and
> find out full reasons.
>

Many economists, ( Paul Krugman and Jeffery Sachs, to name a couple)
have
agrued that  short term capital flow in and out of Asia had a lot to do
with the SE Asian economic crisis.  In the same light,India's and
China's
exchange control structure left them largely unaffected by the Asian
flu.
Therefore before we conclude that speculation is beneficial let us
examine
if we can afford the downside of free capital flow.

IMO, free capital flow provides the opportunity for 'nett lenders' to
escape relatively unaffected by bad investment decisions while 'nett
borrowers' are punished for the mistakes of lenders as well.   Since
India
is likely to remain a 'nett borrower' for some time let us debate this
issue seriously, before applying a text book solution.

Antony


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