Tuesday, December 19, 2006

Never mind:

Only one day after announcing controls on the flow of capital, the Thai government has reversed its new policy after the Thai stock market had its biggest drop ever, of 15%.

The drop in the market came a day after the country’s finance minister announced that any new foreign money coming into the country would have to wait 1 year before it could be pulled out. The goal was to stop speculation and create stability in the currency. However the opposite occurred as markets in the region plunged on speculation that the new law could spread.

It doesn’t take an expert in economics to think if you put controls on capital, new foreign investment will come to a halt. With a world of places to invest, few are going to be willing to put their money in a country that locks them in.

It’s scary how even after several hundred years of success in the practice of free markets, elected officials still think they can change the shape of the economic wheel without consequence.

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