Currency Boards and Currency Restrictions

[hoov]

> Yes it looks reasonable to say the Hong Kong authorities won the first
> round. 
> They may not win every round, but I doubt if they will lose them all.
> Chris Buford

persistent HK problems:

1) HK banks have one one of the highest exposure to property rates
in Asia - over 40% ot total loans committed to real estate...1998
projections were for both private and public sectors to supply
30,000-40.000 dwellings each...market can only absorb this supply
if banks continue to finance puchasing which could mean exposure
rate of abot 50%...even if banks take this risk, possibility of
downgrading by international rating agencies and investors looms...
a situation calling for HK government intervention to fixing the 
mortgage rate and/or collaterize local bank mortgages?...of 
course, attempts to shore up the property sector in this manner
will not benefit working people who cannot afford to purchase
homes...

2) the 1983 pegging of HK currency at HK$ 7.8 to US$ 1 meant an
effective depreciation of 40% in exchange rate...this resulted in
a sharp boost in HK exports, which, when combined, with the
opening of the Mainland's economy led to economic growth in the 
'80s...HK business had access to new markets, international 
capital poured into the colony seeking opportunities in China 
while utilizing HK's developed infrastructure and business culture, 
cheap land and labor in the Pearl delta offered HK businesses 
alternatives to restructuring and upgrading productivity...since 
the early '90s, HK's economy has been experiencing lagging 
productivity growth, due, in part, to the fact that the initial 
'benefits' from China have begun to fade...hence the 'bubble 
economy' - finding it harder to profit from expanded production or 
new businesses, investors turned to real estate and equities...
unemployment is rising, wages are declining, no unemployment
compensation system exists, no minimum wage law exists...meanwhile,
the HK gov't budget places emphasis on the financial and property 
sectors...Michael Hoover