Lucius, goodmorning.Re:
""Sure. When markets go back up wealth is created, though not necessarily to the same people that lost it in the decline. when you think about it, it seems like a miracle that wealth can be created out of thin air. However this kind of voltility
probably makes it harder and/or more expensive to attract new capital, so even if HK market gets back to where it started, the country as a whole still loses. I'm sure that the leaders of HK would have been happier if it had never happened. ""
Markets by nature are volatile and wealth is continuously created and destroyed.Nothing will change that. All that a goverment can and should do is to PROVIDE A BACKGROUND OF CHRONIC STABILITY to the markets through STABLE currency so as not to worsen volatility even further.To provide stability to currency you have to peg it to something; So that if I start to save $ 50000 to buy a house in 8 years, my money will BE worth 50000 in 8 years, and not 25000.This
system functioned beautifully until 1972 when Nixon unpegged the dollar from gold and thus Goverment felt free to print money and inflation/devalued $ started. We are now back to pegging the dollar to a number of things. Greespan looks at gold, money supply, Commodities Index, Commodities futurre Index, wages,unempolyment etc etc; all for the purpose of keeping inflation at 0 and he's come as close to that as anybody else.A difficult job.Ideally Hong Kong should have their own Greenspan ( Al Ho Chi Green?? < gg> ).They don't.Next best ( and cheapest? ) way is to copy something.So they just hooked up to the US$.And it has worked!! for the past 30 years.The " HK Miracle".And it is working now. Ibet you HK will be the engine that will transform China from a tax and spend, redistributionist, inefficient system that made every body equal (-ly poor, gg ), to a system with a stable currency, thus stable to attract investment capital, open factories, get people off their duff to work, and, GENERATE WEALTH!!, which will then be redistributed around in the form of new investment and wealth.
This is my article for the day, gg. I'll go read the papers now.
TA |
