The fixed rate regime in Hong Kong is here to stay. As the benefits are that in such a regime, the economy – wages, prices and the structure of the economy – ultimately adjusts to the exchange rate. Also, pegging the HKD to the USD enables US capital market conditions to be transmitted directly to Asia and enables Hong Kong to do far more in the way of IPOs and loan syndications that it would otherwise be able to do.
The cause of the lack of spending, which leads to high unemployment and low levels of capacity utilization, is the overstretched balance sheets of households and the financial sector in America. There are a few ways to repair the balance sheets. Firstly, you could raise capital if you are a bank or company. Secondly, you could sell away your assets. However, as asset prices have burst, prices are down and households cannot sell or do not have much to sell. Finally, cutting consumption, increasing savings and paying down debts slowly is what is happening now. This makes the growth anemic.
QE will not solve America's financial woes as the main thrust of QE is to counteract bank lending and keep money growth at a slow, albeit positive level. However, the people are already overleveraged and need to pay down their debts. QE will most likely lead to the proliferation of the carry trade.
Asia's balance sheet is strong and they did not have a credit and housing bubble like the rest of the world. That is why they are able to recover quickly.
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