Former Wharton Professor John M. Mason sees ominous signs at the recent Meeting of the G20, that restrictions on the freedom of capital could arise as developing nations react to the Fed's $600 billion quantitative easing. Countries fear QE2 will flood the world with American Money in search of higher returns and create bubbles in local economies. here's what he writes on Seeking Alpha:
"The foundation for the economic health of the world for the last fifty years has been the relatively free flow of capital begun in the 1960s. That consensus is being threatened now.
The extent of the problem is captured in the New York Times article by Landon Thomas, “Countries See Hazards in Free Flow of Capital.”
In China and Taiwan, regulators are imposing fresh restrictions on stock market investments by foreigners. In Brazil, officials have twice raised taxes on foreign investors. Even South Korea…pressure is building on the government to take similar steps.
As the leaders of the 20 major economic powers gather in Seoul, an increasing number of them have either imposed curbs or are in the process of doing so to slow the torrent of hot money into their markets…
Once a core policy commandment of the so-called Washing consensus and held dear by the United States Treasury, the International Monetary Fund, and global investment banks, the belief that unfettered capital flows are a boon for everyone—including the country on the receiving end—has been dealt a major blow."
read the whole article here
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