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Strategies & Market Trends : Asia Forum
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To: tom who wrote (2126)2/14/1998 11:44:00 AM
From: Mohan Marette  Read Replies (3) of 9980
 
Currency Board in Indonesia? To put it crudely the idea is BULL SHIT.

Tom,
The idea of a Currency Board in Indonesia floated by Suharto is rather a worthless one, at this point in time.To think Indonesia can implement this system with 20 billion dollars in Current Account surplus and some borrowed money is absurd.

Depending on where Indonesia wants to peg its currency Rupiah,they need to have at least 100% or better of the anchor currency for this system to be successful in the conventional sense,which they do not have. If they attempt to do this with 50% or less and with borrowed money at that,it will be a disaster and will most likely plunge the country into further chaos,both civil and economic.

It works in Hong Kong because they have the 'anchor' currency to support this system,meaning HK$ is fully covered by the US$ (HK's anchor currency),if not 100% but very close.

Then again Suharto is not stupid, perhaps this is a clever plan specifically designed to get his and his family's fortune out of the country before it is too late and before he goes down into the annals of history as a bad dream.I say this because I don't think this is a well thought out plan at all. No wonder Bob Rubin and Camdessus are dead against this plan.

Disclaimer: The above diatribe is based on my limited knowledge of the 'Currency Board' system and I do not make any claim as to its accuracy.
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