>The big hedge funds here - Tiger, Global, Quantum and others can smash the HK peg very easily. Why do you think that the HKMA is finally starting to bitch about the attacks?
Zzz. If they can smash the peg, why don't they? And as I recall, the HKMA didn't exactly bitch. They squeezed the shorts.
>They've burned over 20% of foreign reserves recently defending this so-called mighty currency that you claim doesn't need defending.
Yeah whatever. I've spent over .001% of my brain reserves arguing with people who make up facts. The WSJ estimates the stock market intervention at $387 million... or about .43% of their reserves.
>Anyway, the article doesn't clarify what you mean by the $HK being fixed & not pegged. To myself and every fncl. journalist out there, (from what I've read) it seems like a peg. I don't see where Henke differentiates. The definition of a peg is that the currency is a fixed rate of exchange that is overseen by the gov.
You must not read very broadly then.
>That's the case in HK and ARG. The peg has got to be fixed to something - the $US, the EURO, whatever. By you using the term "fixed" I don't see any difference than in the word "peg".
Also, to say that the HKMA doesn't make any monetary policy is silly,
because their recent actions contradict the premise of his article.
The HKMA doesn't make monetary policy because they don't print money that isn't backed up by reserves. Get it?
No, I guess not. Okay. In the olden days, every dollar in circulation was backed up by gold, $35 per ounce. In other words, any time I wanted to, I can go to Uncle Sam with my money, and demand its gold equivalent. This is a fixed system. Such is the case with Hong Kong. You can always exchange your HK$ for American dollars and the exchange rate is completely fixed and fully reserved. We went off the gold standard, but that was an active choice, not an eventuality foisted on by speculators. So too may Hong Kong one day scrap their current system, but not because of speculators.
Now imagine this same system where the government promises an ounce of gold for $35, but doesn't actually have any gold. Also imagine that this government prints money like mad. This is the pegged system as practiced by governments that devalue. Speculators (if they are smart) notice this before anybody else, and reap the windfall when the government devalues. But they rely on the same fundamental that we must all abide by: you can't have your cake and eat it too. |
