GR 1300
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CONFIDENTIAL
CONFIDENTIALHKK.
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RA/HKD)
100/ Fop
20 OCT 1983
OF
こ
See
JESKBY 29080OZ
FM HONG KONG 290600Z SEP 83
TO IMMEDIATE FCO
DESK
INDEX
PA
Moda Taken
TELEGRAM NUMBER 1437 OF 29 SEPTEMBER
STRICTLY PERSONAL FOR CLIFT (HONG KONG DEPARTMENT) FROM BREMRADGE
THE FOLLOWMING EXTRACT FROM TDOAY'S ASHAN WALL STREET JOURNAL WILL SERVE AS A USEFUL BACKGROUND.
QUOTE
HOW HONG KONG MIGHT SAVE KTS SHINKING DOLLAR
BY ROBERT MAGNUSON AND JAMES LEUNG
AT LONG LAST, THE HONG KONG GOVERNMENT APPEARS READY TO MAKE A FUNDAMENTAL CHANGE UN MONETARY POLICY IN AN EFFORT TO STABILIZE THE SHINKING LOCAL DOLLAR. ITS EFFORTS ULTIMATELY MAY FAHL BECAUSE MOUNTING POLITICAL UNCERTAINTY COULD OVERSHADOW ANY STEPS THE GOVERNMENT TAKES. BUT IT'S TIME FOR AT TO TRY OUT THE AVAILABLE ECONOMIC TOOLS.
THE GOVERNMENT HAS ONLY HUNTED AT WHAT IT HAS IN MIND. SHORTLY AFTER THE HONG KONG DOLLAR FELL 9.2 PER CENT AGAINST THE U.S. UNIT SATURDAY, THE GOVERNMENT SAND IT WAS CONSIDERING USING THE EXCHANGE FUND - A POOL OF FUNDS USED TO SUPPORT THE HONG KONG
DOLLAR IN AN EFFORT TO INFLUENCE THE EXCHANGE RATE.
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IT SAND NO MORE. BUT TO MOST ECONOMISTS THIS MEANS REIMPOSING, WHITH SOME MODIFICATIONS, THE SYSTEM FOR ISSUING HONG KONG DOLLARS THAT PREVAILED UNTIL 1974. BY CONTROLLING THE MONEY SUPPLY, THE GOVERNMENT COULD INFLUENCE INDIRECTLY THE VALUE OF THE HONG KONG DOLLAR.
QUOTE WHAT WE NEED NOW IS SOME GOVERNMENT INITIATIVE UNQUOTE, SAYS EDWARD LAMOND, RESEARCH DIRECTOR OF W.F. CARR SONS AND CO (HK)
LTD, A UNIT OF THE LONDON-BASED STOCKBROKING FIRM. QUOTE
CONFIDENCE 4N THE HONG KONG DOLLAR WILL RETURN IF THE GOVERNMENT
CAN SHOW THAT IT CAN TAKE CONTROL OF THE MONETARY SYSTEM AND STOP THE SLIDE OF THE HONG KONG DOLLAR UNQUOTE.
THE GOVERNMENT SHOULD QUOTE REGAIN CONTROL ONCE AGAIN OF HONG KONG'S MONETARY BASE BY CONTROLLING THE NOTE-ISSUING MECHANISM
UNQUOTE, SAYS MR LAMOND. MANY ECONOMISTS AGREE.
CONFIDENTIAL
/HERE'S