Changing of guard at Fed worth more than passing interest

At the end of January, the most influential person in the economic life of Hong Kong is due to retire.

Before you pop the corks, Henry Tang is not quitting, nor Donald Tsang. And do not sell your shares in Hutchison and Cheung Kong; Li Ka-shing is not calling it a day.

In any case, Mr Tang and Mr Tsang control an annual budget worth just $250 billion, while according to Forbes, Mr Li is worth only a paltry $100 billion. That makes them all small potatoes beside Hong Kong's most important economic decision-maker, who sits 13,000 kilometres away in Washington - US Federal Reserve chairman Alan Greenspan.

Because of Hong Kong's currency peg to the US dollar, our interest rates move in lockstep with America's. That means later today, when Mr Greenspan convenes the fifth meeting this year of the Fed's monetary policy-setting committee, he will be making critical decisions governing Hong Kong's entire $2.24 trillion money supply.

Next January, after 181/2 years at the helm, Mr Greenspan will retire, just short of his 80th birthday. The political and economic beliefs of his successor will exert enormous influence over Hong Kong's economy. That successor will be chosen by President George W. Bush.

Given Mr Bush's history of picking close political allies for nominally independent posts - Paul Wolfowitz to the World Bank, John Roberts to the Supreme Court - he is sure to choose another for the Fed. That means the chosen candidate is likely to accord with White House economic thinking, including on the relative unimportance of America's US$650 billion current account deficit - essentially the overdraft Americans have run up with the rest of the world by spending too much and saving too little.