> What do you guys think of the idea of the Pacific rim imposing this.
>It seems that the countries with the least economic liberalism i.e.
>China
>and Hong Kong with its currency board is doing about the best in this
>crisis. It seems that with a hugh flight of foreign capital in the
>region currency boards,... seem to be the best bet.
As we watch this unfold, there are further signs of a move away from neo-liberal laissez faire.
Interesting to see the material Michael Hoover was able to track down to the "Hong Kong Voice of Democracy".
Yes it looks reasonable to say the Hong Kong authorities won the first round. The fall on the Hang Seng the day after their intervention came to an end was only comparable in percentage terms to the fall on Wall Street the same day. Yesterday the change was not dramatic, and this morning the index is rising. Confidence in the government to defend the HK dollar has not been lost.
Another straw in the wind is that on Monday Taiwan nailed its colours to the mast. This is significant because although there are presumably no formal links between mainland China and Taiwan, there must be many informal ones. China is seen by international commentators as one of the three areas of the world which may grow in the next twelve months and it would be natural that Taiwan and Hong Kong would think in terms of aligning themselves to the Chinese market in terms of coming out of the world financial crisis.
Taiwan's warning was sharp: "The central bank will stringently monitor the foreign exchange market so that such speculators [as George Soros] will find no quarter to operate here". Although they had found no evidence that funds owned by Soros had entered local foreign exchange markets they would be monitoring closely.
The FT (which on reflection I bought) said that this was just the latest blow to Soros in emerging markets. No comment came from his group. It is ironic that shortly before losing 2bn dollars in Russia Soros had written the letter to the FT advising a modest devaluation of the rouble, together with the introduction of a currency board, not despised as an option later, by Michel Camdessus for the IMF.
Taiwan is seen as having erected considerable barriers to speculative attacks against their dollar. In May, the central bank virtually shut down the trade of futures instruments used to pressure the local currency [which presumably Hong Kong will now consider doing]. In addition inflows of funds destined for the stock market are also subject to central bank approval, allowing the authorities to influence the demand for the currency. This would seem to be a strategic rejection of any but the most passing benefit from short term global financial movements.
Soros denies his culpability for the Asian financial crisis and indeed he is presumably a good bogey man for a system that is inherently about the rapid transfer of short term financial risks across the world. But official Chinese papers on Monday mentioned his name in connection with the continued pressure on the Hong Kong dollar, and Malaysia'a Mahathir Mohammed, has publically named him as a focus of suspicion. And although Mahathir is no Han Chinese there is perhaps a Han influenced economic zone emerging, which is clearly prepared openly to confront Soros, and more importantly what Soros symbolises. They are confident whether they regard themselves as capitalists, socialists, communists, or revisionists, that they are talking about real economies and not just the froth of short term financial transfers.
They may not win every round, but I doubt if they will lose them all.
Chris Buford