Jake's View | It's time for a quantitative easing of our worries
Tapering will kill off Fed's folly, and although higher interest rates will bring us back to reality, HKMA boss can stop fretting over hot money
Hong Kong Monetary Authority boss Norman Chan is a worried man. On Friday he warned that Hong Kong's financial markets will suffer heightened volatility when the US Federal Reserve begins to scale back, or taper, its current programme of quantitative monetary easing.
My colleague Tom Holland and I agree on so much that we tweak each other occasionally when we view things differently. I think perhaps he overstates the worry case about the arrival of this thing called "taper", which, anyway, yet shows little sign of arriving.
Miltonfriedmanism, a branch heresy of the Keynesian school of economic thinking in that it favours artificial stimulus through monetary rather than through classic Keynesian fiscal measures, is in the process of being proved another quack theory in the United States.
Milton's devoted disciple, Ben Bernanke, chairman of the US Federal Reserve, has for five years put into effect the monetarist swindle of showering money from helicopters to keep the US economy out of recession, only to find that the intended recipients of his largesse have left the money on the ground rather than pick it up.
The banks that were meant to pump-prime or reignite (choose your own false metaphor) the economy have simply parked US$2.2 trillion of the money back with the Fed. Their customers don't want to borrow money just yet. They would rather take the time to rebuild the health of their balance sheets. You can lead a horse to water, etc. etc.