The International Herald Tribune, one of many, picks up a report by Associated Press:
KUALA LUMPUR, Malaysia: Foreign funds inflows are keeping Malaysia’s markets on a long rally, but the money is staying in the country because of central bank restrictions and is starting to create economic imbalances, analysts say.
The local currency, the ringgit, is not allowed to be traded offshore, which means currency transactions are limited to within Malaysia. That has created a massive pool of money. [Awash in foreign funds, Malaysia faces economic imbalances over central bank restrictions. AP via IHT. April 8 2007]
Too much many chasing too few capital is a classic, or rather, a textbook recipe for inflation, as mentioned in the same report:
The excess cash in the country is leading to inflationary pressures as there is more money than before, chasing the same amount of goods. [Awash in foreign funds, Malaysia faces economic imbalances over central bank restrictions. AP via IHT. April 8 2007]
Further in the article:
Speculation is now mounting that Bank Negara might eventually lift a curb on the offshore trading of the ringgit that was imposed in 1998 during the Asian financial crisis. [Awash in foreign funds, Malaysia faces economic imbalances over central bank restrictions. AP via IHT. April 8 2007]
It is time to dump our neomercantilist policy in favor of liberal ones.
