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