Speculation
The debates about the impact of the currency speculators on the devaluations of the currency and economy of the country arise from time to time. However many experts doubt that speculators provide a business area for hedgers and move risks from those market members that wish to avoid it to those that may accept it. There are also many economists saying this argument refers more to political and free market philosophy field rather than to economics.
The major experienced speculators are the large hedge funds as well as other “position traders” with high level of capitalization.
Many countries of the world regard the currency speculation as a quite shady business. The investments into stocks and bonds (i.e. traditional financial instruments) are usually regarded as a useful activity contributing to the economic growth of this or that country as it provides capital. The situation with currency speculation is quite opposite to the one mentioned above as it is considered to be usual gambling that may even contradict the pursued economic policy. Let’s consider following examples: the currency speculation caused the interest rates hike by the Central Bank of Sweden to 500% annually and then the devaluation of the krona in 1992. Mahathir Mohamad the former Malaysian Prime Minister is the one of those supporting this opinion. He was sure that George Soros and other speculators are the right persons to blame for the devaluation of the national currency in 1997.
On the other hand there are experts thinking otherwise and considering speculators as those who contribute to the international agreements and economic “laws” to gain the profit.
From this point of view each country may manage its finances and national economy in the wrong way and the forex speculators then will speed up the coming of the crisis. Furthermore, inevitable and quick crisis may turn to be a better solution than further incorrect economy management. Therefore those experts blaming the speculators are trying to clear themselves for the economic collapses they led their countries to. For instance, the economy recovery in Malaysia was quite quick after the currency came under the control that was the opposite to the IMF advice.
