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Strategies & Market Trends : Currencies and the Global Capital Markets -- Ignore unavailable to you. Want to Upgrade?

To: Lee who wrote (424)	8/19/1998 11:32:00 PM
From: Chip McVickar	Read Replies (3) \| Respond to of 3536

Lee I am not an expert here, but I will give a try. Read the article by Hanke off #425 on this thread, it is a good place to begin and from this one can say..... H.K. is not a normal pegged currency.... Hong Kong will not devalue it's currency. To do that will cause a far greaster crisis then exists. Russia has a pegged currency and is able to alter or set the exchange rates. They just did that....a type of devaluation. H.K. and Agentina cannot do that... The whole point of a currency board is to take away from politicians or currency traders or any interest....the possibility or the ability to manipulate a currency for personal advantage. Hong Kong has such a system in place...a mechanical structure that is the anchor for a fixed rate system. One of the great financial arguments of our time is being played-out right in front of our noses. Is a floated currency more stable then a fixed rate system... And in a fixed rate system is a commodity based anchor or a single currency a more stable anchor then gold as an anchor..? Furthermore, is an anchor of a single nations currency (US$) capable of maintaining stable currency policies under a pegged currency system..? The whole point of the currency boards of HK and Argentina is to maintain and assure confidence in the sound money of that nation. To maitain confidence that ones currency will have a stable value beyond direct manipulation...."and remain rock solid" I believe Honk Kong's legislature can remove the structure legally binding it to the chosen anchor of a single currency $US, but that would destroy Hong Kong. I believe Hanke is correct, "...the H.K. dollar will remain rock solid." It will weather the storm. Also most likely...the US will defend the position taken by H.K. What will come out of this....floated currencies as we have seen since Nixon in 1971....currency boards fixed to a single $dollar or $ECU.... currencies boards fixed to a basket of commodities....or perhaps fixed to Gold..? Also behind this are the governing systems of socialism, capitalism, democracy, communism and shall we say "free market systems" that seem to work independently of any national government. All seek to supply the answer to what is a stable economy.....much less a stable international system of monetary policies. The whole spectical unfolding throughout the international monetary system is extra-ordinary....Japan and Hong Kong are extremely important to the sytem that has been governing our financial lives. So far the second shoe has not fallen. There is one more point to be made...both the regulatory and legal structures must be set-up and functioning correctly to maintain any of these currency systems. Confidence cannot be maitained otherwise as we have seen in Japan's lack of transpanency within its insurance, realestate, capital and banking sectors. Recently....news reports have surfaced on Mr. Greenspans personal financial dealings and holdings...in these required documents he states that all his personal wealth is placed in short term US treasury obligations. Now what does this tell you..? These are only my opinions, I hope the experts will quickly correct me if I am wrong on any points put forth here. Chip