Friday, December 12, 2008

How to Live in the 21st Century

Compass' have this fantastic "How to Live in the 21st Century" website for submitting new policy ideas, I've made my own contribution here although it was rather full of typo's and missing a title when I submitted it.

I'm arguing for the reintroduction of a form of Exchange Control based on a tripwire and speedbump approach. The idea is that if a chosen condition occurs such as a drop in the currency of more than a certain amount (a tripwire) a policy is enacted to put the brakes on movement in the currency (a speedbump). For example if the value of the pound dropped below €1.05, an exit tax of 5% could be applied on any attempt to exchange the pound. This is just one example, there is plenty of flexibility within this kind of approach, for example a tripwire could be triggered by an excessive volume of foreign exchange and a speedbump could be any number of restrictive measures.

A big problem fo economies is that in boom times large quantities of foreign investment can rapidly flow into a country and when panic stikes it exits very rapidly. In a time of panic it can force investors to weigh the certain loss from withdrawing investment against the possibility of loss from upcoming economic problems. It should also guard against the problem of excessive interbank lending across international borders.

Quite frankly, I'm expecting to be lambasted as completely bonkers by some and be called dull and technocratic by the rest, but who knows?

No comments: