Recent comments by Sin-ming Shaw

• Hong Kong’s Hollow Leadership

  Correspondents wishing to engage in a meaningful discussion as to whether HK's "linked" exchange rate system is "good" for HK should familiarize themselves with how the system functions.
  
  Specifically in what way it is different from the Currency Board from which it was derived and why it is a better or worse system than the Currency Board. In that enquiry they should understand how each works.
  
  Second, they are advised to re-visit (if they had studied international economics in university) Milton Friedman's Essays on Floating Exchange Rate and the Mundell-Fleming model.
  
  Third before they launch specious rebuttals they should read my comments with a bit more care.
  
  Here is the exact quote: "Regarding the HK dollar peg. No one remotely intelligent has claimed changing the peg is THE answer. It is certainly a partial but very important answer".
  

• Hong Kong’s Hollow Leadership

  HK Gas is indeed part of the empire of the other Mr. Lee -- Lee Shau Kee.
  
  Thus Lee is listed in Forbes as the 24th richest in the world whose net worth was put at US$20.3 billion versus Mr. Li Kashing's $31B, the 8th richest in the world. Mr. Li controls HK Electric while Mr. Lee controls HK Gas. My mistake.
  
  Regarding the HK dollar peg. No one remotely intelligent has claimed changing the peg is THE answer. It is certainly a partial but very important answer.
  
  Once the dollar is de-pegged and is allowed to float and once HK's Monetary Authority became a true Central Bank -- a companion change to the de-pegging -- then HK's interest rates and money supply are no longer a direct consequence of what the Fed does.
  
  Only then HK's new Central Bank will gain a tool to tame asset inflation. The current administrative measures will show to be self-defeating.
  
  The issue is not whether "sane" politician or bureaucrats would risk their career backing de-pegging, it is about whether keeping the currency board arrangement is in and of itself good or bad for the HK economy.
  
  Intelligent people understand governments can only set nominal rates of exchange while the market sets the real rates.
  
  Hence, asset inflation is what markets do. Volatility is what markets do. HK, precisely it is open and otherwise free, "eats" volatility for breakfast.
  
  Even the PRC, historically a command economy, has allowed a much greater volatility in its exchange rate than Hong Kong.
  
  Being an open economy is not an argument against a free floating exchange rate. Quite the contrary.
  
  A revisit of Milton Friedman's essay on this topic is well worth the effort for anyone who wishes to think through the issue of floating versus fixed exchange rate followed by Mundell-Johnson's classic essays on the same topic.