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Strategies & Market Trends : Asia Forum
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To: Paul Berliner who wrote (5674)8/20/1998 1:05:00 AM
From: Chip McVickar  Read Replies (1) of 9980
 
Paul,
I am not an expert, but I believe there is a structural difference
between a pegged currency and a fixed currency.

Russia has a pegged currency that is fixed to a single currency (US$)
and can be altered by the government at will. It is subject to
political and other kinds of manipulation. Russia just expanded its
pegged exchange rate a subtle form of devaluation. Pegged currencies
are esentially publicly stated exchange rates. Currency boards as
Hanke states cannot be manipulated by national interests, political
interests or manipulated by currency traders for anyones personal interests.
However, the basis of confidence (outside of the currency) remains on
the ability of the country to maintain responsible economic polocies...
such as debt ratios to GDP.

With the currency boards of Argentina and H.K. these are set-up
outside of and apart from any ability for anyone to change or manipulate
the structure. Although I believe the full legislatures can vote to
legally overturn the use of a currency board.

The big arguments, surround wheither these boards should be fixed to gold,
to a single curriency or a basket of currencies and/or commodities to
gain the greatest degree of confidence.

Further more....I believe that H.K. will not devalue as this will destroy
all that the country has built itself on. But other fundamental economic
factors can bring down the country and the worlds confidence in its
ability to prosper and be competitive in world currency markets. Certainly
the US dollar has faced such speculation not so long ago. But if the
H.K. realestate market follows Japan then the historical confidence
given to H.K. maybe broken.
Chip
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