“A Lesson in the Virtue of a Stable Currency”

The article “A Lesson in the Virtue of a Stable Currency” by John Greenwood and Steve H. Hanke was published on 7:09 p.m. on April 1, 2019. It talks about how the Hong Kong dollar keeps becoming more and more shortened by speculators, but that this does not mean that they know how a currency board works, and that this is problematic. The article cites the issue that the Hong Kong dollar is facing some issues, to the point at which the Hong Kong Monetary Authority has to defend it, burning through about $2 billion of reserves in U.S. dollars in the past month, and that this is signaling a devaluation. Spectators, however, are not able to understand the linked rate between maintaining this currency board in Hong Kong and the exchange rates that banks all throughout the world have, which is very serious. It then talks about how these currency boards hold anchor-currency reserves that are the equivalent or slightly more than the value of the currency that it is issuing, and that it always has more than enough reserves to fulfill its obligation, but that perhaps this is going to be a problem with Hong Kong. However, Hong Kong has built excess reserves, and even if these will eventually need to be run down, they will be able to remove excess Hong Kong dollars from the U.S. market while still supplying U.S. dollars to their own market. This is very interesting to observe because of how one can watch the fluctuating value of these currencies and how they are intertwined with one another, with the rising or falling of one impacting the markets all the way on the other side of the world because of how they are connected to each other. This is something that can be problematic when things are bad but very beneficial when things are good, permitting for strong relationships to help maintain these economies and markets in a strong manner. As a result of this, it is important for the marketing sector in today’s world to be able to know how currency boards work, as this was something that the article highlighted upon in the piece, and that they can watch out for these changes in prediction of what will happen in the future.