Tuesday, November 21, 2006

Liquidity is the answer

People wonder why hot money still flowing into the economy, as reflected by high demand on debt instrument issued by Indonesian companies, amid fears of default (as shown by Sulfindo case) or legal issue (recent verdict from Supreme Court on Indah Kiat bond). The answer is high liquidity, not necessarily because they have oustanding performances. Liquidity in the banking system is so high as the banks are unwilling to lend. How long the economy could live in this situation?



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