Rupiah crisis

Rupiah crisis

From Republika

Observing the recent rupiah crisis I feel that the government
is resigned to abandoning its "power" regulating the currency. In
a free currency system based on a market with high-level capital
mobility, the substance is clear: really good fiscal and monetary
policies. The government's current tightening of money in
circulation shows a move in the opposite direction although its
aim is to teach a lesson to domestic speculators and to reduce
inflation.

However, the market already expects the rupiah to continue to
decline toward a new market equilibrium. What will happen is
"tight money now bringing inflation now".

It would perhaps be beneficial to think of a more
sophisticated method. What is happening now seems to be similar
to killing mice in the house by burning down the whole house.

AKHMAD MUKHTAR

Jakarta