Check out Daniel Drezner’s take on the possible return of capital controls.

What intrigues me is how the financial sector responds to a situation in which their freedom of action in emerging markets becomes more and more constrained. It’s possible that they could pressure the Fed to change its position in the future. It’s also possible, however, that big firms could see these controls as a useful barrier to entry for new firms.

Michael Pettis has more on how China might attempt to manage hot money inflows, and this:

I think there is a very good chance that in retrospect QE2 will be seen as the equivalent of the Plaza Accord. If the US continues to pursue quantitative easing, it could spell the last stage of China’s great growth spurt followed by the beginning of the big adjustment. And like the Plaza Accord it will sow many years of suspicion and conspiracy theories.

Given that we’re talking about great powers and potential strategic rivals, this isn’t good news.