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Is the peg safe?

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  1. #51

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    No proof, but i hear there is a massive inflow of mainland $ into HK in the form of private equity that previously was held in US (overseas). Similar to this? https://www.aljazeera.com/ajimpact/m...064809478.html


  2. #52
    Quote Originally Posted by billyb:
    What are people's thoughts on these tweets?

    https://twitter.com/solomonyue/statu...955840?lang=en
    https://twitter.com/SolomonYue/statu...14584893976576

    Not really sure who he is and he probably is a scaremongerer, but he was pretty confident about the Hong Kong Human Rights and Democracy Act passing last year so he probably has some inside knowledge/murmurings from the Trump circle?
    "Solomon Yue, Jr. is a Chinese American politician and entrepreneur. He is vice chairman and CEO of Republicans Overseas and the national committeeman of the Republican Party of Oregon."

    Side note: if there is/was a shortage of USD notes it was obviously a temporary one as I couldn't find anything to suggest that the situation was on-going. In any case, in a world that is increasingly cashless, people can buy and sell currencies without using cash or going near a bank branch these days.

  3. #53

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    honestly, how much can you trade at the counter of a money changer ?

    1 USD 100 (largest circulation note) = 1g.
    1m USD = 10kg
    1b USD = 10 tonnes...

    so effectively you need 10 tonnes of USD note for 1b..

    yesterday HKMA just swap HKD 2.2b worth of USD into HKD digitally for those guys not keen to keep in USD.. it has happened regularly in the last one month and total amount swapped was around 70b HKD (or 10b USD) higher compared to start of the year..

    very drastically different scale of opposite direction flows.. if i am a decent reporter i wouldn't be writing something and posting it in epoch times as well, pretty much as trustworthy as the global times.


  4. #54

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    "Solomon Yue, Jr. is a Chinese American politician and entrepreneur. He is vice chairman and CEO of Republicans Overseas and the national committeeman of the Republican Party of Oregon."
    And a general all round clown who for some reason HKers and anti-establishment people tend to bend over for.
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  5. #55

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    Quote Originally Posted by shri:
    And a general all round clown who for some reason HKers and anti-establishment people tend to bend over for.
    What makes him a clown?

  6. #56

    The Dawn of Chaos

    Interesting character - Hugh Hendry - pegs will fall, be long equities & gold.

    https://www.youtube.com/watch?v=XYCPId1-rW0


  7. #57

    @ Elefant&Castle Thanks for posting,

    While I did get to the end of it, he lost me right at the beginning with his claim that inflation is not a monetary phenomenon. His references to the Volker era were also well off the mark.

    That said, he's made me curious about the Saudi USD peg which is not something I've looked at before.

    https://www.arabianbusiness.com/curr...against-dollar

    shri likes this.

  8. #58

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    pegs fall because FX volatility too high.. which makes sense because it becomes costly for central banks to maintain peg... but the message also doesn't say where it actually fall towards.. since US fed is expanding balance sheet so much, and he is saying buy gold buy equities, then a country that does not expand balance sheet alot will naturally go stronger against USD.. isn't that why the aggregate balance suddenly goes to 150b HKD now against Kyle Bass's guesswork ?


  9. #59

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    I am still highly skeptical on Bass' bet that the peg will break. But its interesting to note the political angle now on the peg issue, on how, in the unlikely event that HKMA's $442 billion reserves is inadequate to ward off the speculators, it can ask the People's Bank of China for cash rather than the US. In short, no chance in hell the peg will break, albeit this time it won't break for a different reason.


    https://www.ft.com/content/ec01b9e5-...4-56b41ecd7223

    The HKMA’s first line of defence, of course, is its $442bn in foreign exchange reserves — a sum roughly double the monetary base. Mr Yue also notes that the authority’s “surveillance” techniques are more advanced than during the Asian financial crisis, so that it has good intelligence on “when banks are lending to speculators”.Yet if the link were to come under sustained pressure, and higher interest rates proved inadequate to stem outflows, the HKMA might not look to the US Federal Reserve to supply a flow of US dollars.One person close to the HKMA said that it could turn to the People’s Bank of China, rather than the Fed, if the system really needed an external source of US dollars.That Hong Kong would rely on China rather than the US for support in maintaining the level of the Hong Kong dollar is a sign of the politicisation of central banks, as the stand-off between Beijing and Washington endures.

    Tapping the PBoC rather than the Fed would be “a good indication that relations have become more political than ever before”, said Zhiwu Chen, head of the Asia Global Institute at Hong Kong University. The HKMA would do that only if goodwill with the US were “totally exhausted”, he added.Dino Kos, a former head of markets at the New York Fed, said that “in the minds of Fed officials, there is a clear line between monetary policy and foreign policy and the Fed is always conscious of that”. In that context, the US central bank would be “crazy” to allow a drawdown of US dollars to the HKMA “without permission from the US Treasury”, added Mr Kos, who is now a senior executive with CLS, a forex settlement provider.Would all that firepower be enough to protect the link? This time the context is very different, meaning that confidence in the system does not depend simply on the weapons that the HKMA is able to deploy.In the past, the strength of the exchange-rate system was ultimately about confidence in the future of Hong Kong as the meeting ground between the worlds of Western capitalism and so-called socialism with Chinese characteristics.

    But as demonstrated this week by the new national security law for Hong Kong, hurriedly approved by Beijing, it is now very much a Chinese city. If that is the case, say some, does it not follow that the days of the old system are numbered?“Hong Kong has been like West Berlin during the Cold War,” said Kevin Lai, head of economic research for Daiwa Capital Markets in Hong Kong. In time, he said, “it will become East Berlin”.

    Last edited by Coolboy; 01-07-2020 at 07:27 PM.

  10. #60
    Quote Originally Posted by traineeinvestor:

    That said, he's made me curious about the Saudi USD peg which is not something I've looked at before.

    https://www.arabianbusiness.com/curr...against-dollar
    Do you subscribe to Arabian Business? Just curious - because that link is behind a paywall.
    Saudi seems like a train wreck - ballooning expenses, dwindling oil revenues, despotic ruler - something has to give, and the peg is probably the least of it.
    traineeinvestor likes this.

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