Sunday, November 21, 2010

Tied to the U.S. Dollar, Hong Kong Cannot Control Its Future

IMF warns Hong Kong about runaway housing prices
Hong Kong’s fixed exchange rate system with the US dollar means Hong Kong essentially imports the interest rates set by the Federal Reserve, currently very low.

In other words, Hong Kong can’t raise interest rates to counter a housing bubble and inflation.

In lieu of raising interest rates, Hong Kong has been raising downpayment requirements, to no avail. Sound familiar?

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