A handout lottery with such poor odds - and such a big PR effort
with Jake van der Kamp
'I will issue $5 billion to $10 billion worth of Hong Kong-dollar iBond under the Government Bond Programme. This will provide our citizens with another investment option for coping with inflation while promoting the development of the local retail bond market.'
Financial Secretary John Tsang Chun-wah
2011 budget speech
I feel lazy today. I don't really feel like doing any work. They tell me anyway that a picture is worth a thousand words and, as my column usually runs to only 800 words, I think I'll just do the picture instead. It tells the whole story.
Well, maybe a few words. That picture is the first chart below. It is a very simple one. The red bar on its left shows you the total amount of all Hong Kong dollar deposits held with financial institutions in Hong Kong. The latest figure is HK$3.62 trillion.
That's only what we hold in Hong Kong dollar deposits. It doesn't include cash, it doesn't include foreign-currency deposits we may hold, it doesn't include bonds or other fixed-income instruments and it doesn't include holdings on the stock market.
The green bar on its right represents the maximum of HK$10 billion that Little Tsang (as opposed to Boss Tsang Bow-tie) says he will provide in the way of inflation-linked bonds to help us cope with inflation.
And now here is the question for you. Can you see any green in that green bar? In fact, can you see any bar at all? I could when I worked it up on my computer but I don't normally see the final printed version of my charts until I pick up the paper next morning. I assure you, however, that there is a second bar in that chart. Really, I do, honest.
What those bars tell you is that for every HK$362 on deposit here, the deposits that currently pay you a deposit interest rate of 0.000000000001 per cent, John Tsang will offer a special deposit rate on HK$1.
To put this in further perspective, a Hong Kong dollar is a round metal thing with a picture of a flower on one side. It's worth so little you can't buy anything with just one any longer.
Mr Tsang hasn't said how much he will pay you on it, only that the interest rate will be linked to inflation. That could mean anything but we'll be kind and say it means a touch more than inflation on the consumer price index.
The second chart shows you what the relationship between inflation and the average bank interest rate has been over the past six years.
It suggests that Mr Tsang will have to pay at least 3.5 per cent, which would be very nice as nothing like it yields that much right now. May I have some please?
No, I may not. I don't live in public housing and therefore I am probably not qualified. It's no big loss, however, when I think of the odds. If I did qualify and applied for HK$10,000 worth of those inflation bonds, I might expect to get HK$27.62 worth. That's what 1 in 362 means.
I think I'll try the Macau race track instead. They never offer such bad odds there. They just shoot the horse if it's so ill favoured.
But it's no good trying to get the Hong Kong government to change its ways. The handout lottery has become one of its regular practices in recent years. The idea is to come up with a warm-sounding name, 'coping with inflation' for instance, and then see how many people will put up their hands for a lottery built around it.
The important thing is to work up a big public relations effort to say how caring and socially aware it proves you to be. You never say how poor the odds are or how little the scheme addresses itself to the underlying problem.
It's the Eva Peron approach to public affairs. You take a little from everyone and then you put some of it back in the pockets of a chosen few so that you can sing about how much good you've done for the world.
Just read that budget. It so oozes with self-congratulation that this would be Saudi Arabia if the ooze were oil.