Hong Kong currency board reserves at risk

[Skip to the end] Hong Kong’s currency board arrangement requires net exports to fund domestic net financial assets (‘money supply’) needs that other nations get ‘free’ from their deficit spending. Net Hong Kong dollars can be had only by buying them from the monetary authority with USD, etc. With exports markets collapsing, the direct result […]

Hong Kong and deflation

[Skip to the end] The Hong Kong currency board arrangement means net Hong Kong financial assets (AKA money supply) can grow only via net exports (and/or external debt). This means market forces work to sustain net exports ‘at any cost’. The usual result is a deflationary mess, until ‘competitiveness’ is achieved to the extent net […]

Bloomberg: Bank run in HK

[Skip to the end] This happens all the time with fixed exchange rates and currency boards. The only way for banks to get ‘real’ (convertible) $HK for their depositors is to buy them from the monetary authority with $US. That usually means banks have to borrow $US to meet withdrawals of $HK, and most banks […]