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-----Original Message-----
From: Earl Adamy <eadamy@xxxxxxxxxx>
Subject: Re: Brazil!
>At the risk of upsetting the free marketers, I'm frankly somewhat pleased
to
>see some of the central banks around the world (e.g. Hong Kong) putting the
>interests of their countries ahead of the hot money, hedge funds, and
>bankers who expect a bailout when their ill-considered loans go bad.
I'm a free marketer and I actually agree with you to a certain extent. I
was disappointed at first to hear about Hong Kong's intervention in their
stock market (Milton Friedman almost had a heart attack), but the more I
thought about it, Hong Kong's detractors seem to be overlooking one very
important point.
The reason Hong Kong is under attack is because they have their currency
pegged to the US dollar. In other words, the Hong Kong currency is
ARTIFICIALLY priced, there is no free market. People such as Friedman have
applauded this action as being one of the main reasons for Hong Kong's
prosperity in the 90's. The same free marketers who endorsed this
artificial currency peg are now criticizing them for intervening in the free
market... Sounds a little hypocritical to me.
I'm not saying buying stocks was necessarily the right answer, but if
pegging their currency to the dollar made sense, then subsequent actions to
support that policy are certainly justified.
Bruce
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