STOCKS IN THE NEWS: "India's Conundrum: How to Control a Stock Bubble; Move to Put Chill on 'Hot Money' Send Market on Wild Ride, but Investors Still Want In," by Jackie Range and Joanna Slater, Wall Street Journal, 18 October 2007, p. C2.
Clearly, a good problem to have, but one to manage.
In the last year, foreign investors shove two-and-a-half times the money into India's stock markets than in the year previous.
Unlike in China, where foreign access to stock markets is highly limited, speculative pressure in India comes heavily from abroad.
To me, this is a classic case of broadband economic connectivity forcing rule-set upgrades. You want the connectivity, it brings unintended consequences and highlights gaps in your rule sets, so you're forced to add more rules, and those rules make you more attractive to more outsiders and insiders seeking cross-border connectivity, so a virtuous circle.
Does it come without crises?
Are you kidding!
That's the main instrument by which rules come about. So don't look for a lack of crises as a sign of the stabilizing impact of rules in New Core situations. Look at how quickly they're processed, with the key question being: Are they processed faster each time they occur?
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