The situation in Indonesia has been made even stranger and more dangerous than it might otherwise have been by the intervention of one economist whose confidence that he knows the answer demonstrates my rule. Last month, an economist named Steven Hanke suddenly emerged as a key adviser to President Suharto, having convinced him that all his troubles could be solved by introducing a "currency board"--a system that backs a country's currency one-for-one with foreign exchange reserves and removes any discretion from future monetary policy.

I wish I could say that a currency board is a stupid idea per se. It isn't: Under some circumstances, especially when a country has a history of high inflation, it can be very useful. Moreover, some sensible places--Hong Kong, Argentina--have currency boards and are pleased with the results. However, whatever its virtues, a currency board is not a panacea--and most economists think that in Indonesia right now, it would do more harm than good.

So how did Hanke manage to convince the ruler of a vast nation otherwise? His achievement was especially remarkable because he was not exactly a well-known figure before this episode. Indeed, the reaction among most of the usual suspects was "Steven who?" Although he holds a position at Johns Hopkins University, Hanke might perhaps best be described as a professional ideologue. For the last decade, at least as far as I can tell, he has published only in Forbes, the Cato Journal, and the op-ed page of the Wall Street Journal. And while press accounts have described him as a major player in the establishment of currency boards elsewhere, people who should know dispute that--one knowledgeable informant describes him as "one of the 500 people claiming credit for Bulgaria's currency board." Hanke also has managed to convey the impression that he played an important role in Argentina's epic 1991 stabilization; but according to then-Finance Minister Domingo Cavallo, he first became involved only three years later--and as a publicist, not an adviser.

It remains unclear exactly how Hanke got in touch with the Suharto family, and whether they imagined him a weightier figure than he is. But the appeal of his plan is obvious--it is the same as the appeal of supply side economics, which is not surprising given his ideological base. First of all, the plan offered something for nothing: economic recovery without all these pesky financial reforms the IMF was demanding. And it just so happened that in order to deliver these benefits, the government would have to do something that served the personal financial interests of those who supported the plan (in this case the Suharto family): use its foreign exchange reserves to support the currency, making it possible for those who might want to move their money elsewhere--say, to Swiss bank accounts--to do so at a favorable rate.

Events are moving fast in Indonesia right now, and the Hanke plan has been on again, off again. By the time you read this, anything may have happened--including complete catastrophe.