Professor of Harvard ringing a bell on crisis potential in 2012

The global economic crisis is predicted to be back again in 2012. This is consistent with the 15-year crisis cycle with the capital inflow as one of the indication.

Harpel Professor of Capital Formation and Growth Harvard University Jeffrey Frankel in an event of “IMF-BI-BKPM Joint Conference Coping with Asia’s Large Capital Inflows in A Multi-Speed Global Economy”, held in Bali on Friday, 11 March 2011 stated that the cycle of crisis occurred in a tendency of 15-years at a time. And observing that inclination, then we will face a crisis again in 2012.

He also stressed that the emerging market countries should aware of the potential of such symptom. Because, the tendency of the impendent of economic crisis is often associated with the swift flow of foreign funds (capital inflow) to developing countries.

The first crisis occurred in 1982 resulted by the capital inflow that came about in 6 years (1975-1981), while the second crisis took place in Asia in 1997 with capital inflow which also happened during the 6 years of time span (1990-1996).

Noting from the above phenomenon, he is anxious that there will be another global crisis in the coming 2012, concerning that the flow of foreign capital already get in since 2003.

In addition, he also noticing that the rate of inflation in most developing countries already started to give pressure on the economic condition of such countries. India, China, Indonesia and Singapore are in threat of overheating.

Thus, he asked the emerging countries, including Indonesia to keep caution to the possibility of such potential indication.

For information, based on data of Institute of International Finance (IIF) submitted by the Director of Economic Research and Monetary Policy of Bank Indonesia, Perry Warjiyo, the amount of capital inflows that will enter to the emerging markets of Asia countries reached around US$400 billion, of which approximately US$13-15 billion will go to Indonesia.

(This article was freely translated from the original article published in Inilah.com : Profesor Harvard Ingatkan Potensi Krisis di 2012)