Capital inflows can be micro-managed by each central banks

“We need a new framework where not everything rests on any one policy, too much of the burden, too much of the heavy lifting is now resting on monetary policy,” Mr. Tharman said on a panel at the IMF’s annual spring meeting. “We need a strategy that is internationally coordinated and does not rest everything on either monetary policy, fiscal adjustment or macro prudential policies.”

His views signal a growing sensitivity among governments in Asia over the impact on their own economies and are a criticism of the ultraloose monetary policies is being pursued in Japan, the U.K., the euro zone and the U.S. in an attempt to kick-start sluggish growth, even as public spending is being cut.

South Korea has complained that a huge bond-buying program by Japan is hurting their exporters.

“Your firewall is your central banker to co-ordinate the capital inflows into industries that needed the cash like infrastructure instead of property, it is not possible for a centralised policy of all countries as the needs of each country is different, you have all the tools in your drawer, you just got to learn how to tweak from experience, if you are South Korea you do not need to start a currency war with Japan, it is playing with demand and supply for your exporters, which will indirectly lower your currency, not forgeting you are in full control of your firewall, not Japan. Example if I want to sell more cars it is stupid to manipulate the currency when the factors are steel and manpower costs which is fixed, but profit and prices is not, so it is better to manage prices to sell more cars. It is difficult to manipulate currency when the determinents like capital inflow/outflow, balance of payments will affect horizontally all industries, it is better to manage vertically that specific industry by playing with the factors like prices/profits etc to control demand and supply. I can give a very detailed description of just 3 markets for cars, South Korea, Japan and China and all the factors and conditions that determine demand and supply, but it is too long and complicated to explain here, even the entire global markets of EU, US and Asia. If I can breakdown the entire stock markets of the whole world, breaking down the global car industry is chicken feet.”

Example if I want to study the PC market, I will first study the import of the 5 top brands in Singapore, and the export number of brands and PC from manufacturing, and the associated peripherals, then compare it to the global trade of PCs, with all these different views, it is then possible to get an in depth picture, or else you can never see the connection, the plus and minus, and the ways to make money.

– Contributed by Oogle.

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