currency board

pms laflame at
Wed Sep 9 22:55:54 PDT 1998

" By prohibiting shorting on the stock market they eliminated the following transaction sequence:

borrow a stock sell it take the HK currency and convert to dollars wait for HK currency to fall (caused in part by the act of conversion) wait for stock market to fall (helped along by shorting and fall of currency) buy currency back at much lower price buy stock back at much lower price and pay off "short position"

...which had the aforementioned effect of causing bank liquidity to dry up. Buying HK dollars in an effort to outgun the speculators would have been fruitless. By contrast, bidding stock values up against short positions was a major "burn" to speculators, forcing them to come back in (buying currency and stock) in order not to get caught having to pay back that borrowed stock at an appreciated price and quite possibly in an appreciated currency."]

Greg-thanks for this step-by-step. I think I'm getting aholt of it.

I hope reading Doug's book will help me with this stuff. (Bought it the first week as a political statement, but.... Partly I think it's hard to understand because it really is amazing that people are allowed to do this shit. Sick, sick, sick. One thinks of self-obsessed children playing a board game, tossing people instead of dice. I know I've been jazzed about my little pesos in the market but that's a matter of being happy I'm making a late attempt at pro-active functioning of many sorts. Almost makes me want to pull that black blankie back over my head, NOT!

Koo-koo-ka-choo pms

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