How are you?  I thought I'd share with you some thoughts that crossed my mind while at an international conference recently.  Enjoy!

I am attending a conference on how to cope with the huge amount of foreign capital inflows currently experienced by the Emerging Markets, including Indonesia as one of the recipients of these inflows.  

The nature of Capital is such that it is always in search of greater yield and having the desire to grow, and at the moment the developing economies of Asia and Latin America are attractive places to get better returns than their countries of origin such as the US and Europe where interests rates are lower and the economies still recovering from the recent global economic crisis.  

Now big amount of Capital inflows is like a case of too much of a good thing, or ‘too much love’ to quote one of the speakers, where, if not carefully manage could end in tears.  Previous financial crises - and they are still fresh in our minds, particularly the Asian Financial crisis of 1997 - have shown that too much capital inflows too quickly could easily turn into capital outflows at the slightest sign of upset or if there are better prospects for yield elsewhere, resulting in imbalances in the current account, volatility in the exchange rate and could be detrimental to the country’s overall economic health