TNAG-1347-FCO40-1777-Financial-policy-in-Hong-Kong-1984 — Page 56

FCO40 Hong Kong Department Records 聯邦事務部香港部檔案 All

香港政府金融科

香港夏慈道十八號

海宿中心第二座二十四樓

EM TEL. No.:

5-290021

LXIX OUR Ref. (65) in M 1/7C II

SO YOUR REF.

:

Professor Thomas J. Sargent,

Research Department,

Federal Reserve Bank of Minneapolis,

Minneapolis,

Minnesota, U.S.A.

MONETARY AFFAIRS BRANCH

HONG KONG GOVERNMENT

24TH FLOOR.

ADMIRALTY CENTRE, TOWER II, 18 HARCOURT ROAD,

HONG KONG.

13 June 1984

Dear Professor Sargent,

When you called on me about a year ago we had what I thought was an interesting and productive chat about the Hong Kong monetary system, and you left re with the impression that you understood how the system operated, along with its institutional peculiarities, and that you had some sympathy for me and my colleagues in having to confront the contemporary confidence crisis.

Alas, I was mistaken. Your article, "Speculations about the speculation against the Hong Kong dollar", recently been brought to my attention. I take the strongest exception to your suggestion that the Hong Kong Government deliberately engineered the HKS depreciation. As you yourself

As you yourself admit, there is no direct evidence. And you certainly chose to ignore most of what I told you about both the theoretical and the practical aspects of our system. Thus, even your circumstantial evidence is contrived on an incorrect picture of the Exchange Fund's role and capabilities (see below). I cannot think that you found any economist of standing during your visit to Hong Kong who seriously subscribed to your viewpoint.

I would be the last person to discourage a free academic debate about our monetary system; indeed, I have made active efforts to encourage one amongst academics here. Nevertheless, I do feel that it was singularly ill-advised for a Federal Reserve bank to publish (whatever the disclaimers) an article by an economist of your stature, making such unfounded allegations of another monetary authority at a time of extreme political sensitivity.

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