It is interesting to observe how instantly and vehemently Hong Kong's financial authorities have responded to criticism from US Federal Reserve Board chairman Alan Greenspan.
In recent testimony to the US Congress, Mr Greenspan said the consequences of the Hong Kong Government buying stock worth an estimated $120 billion in August could erode the credibility of the Hong Kong Monetary Authority (HKMA).
Mr Greenspan's comments clearly stung both Financial Secretary Donald Tsang Yam-kuen and HKMA chief Joseph Yam Chi-kwong. They immediately protested that their intention was never to prop up share prices but to chase foreign manipulators out of the Hong Kong stock market.
How close to the mark was Mr Greenspan? He certainly cannot claim that he himself never intervenes in markets. It is his job to do so. When the Fed buys or sells Treasury bills to adjust liquidity in the US financial system it is definitely intervening in the market. It does so too when it changes its discount rates to move interest rates up or down.
In fact, if one were to run a poll among investors worldwide as to whose market activities have the biggest impact on markets, Mr Greenspan would find himself named the world's No 1 interventionist.
No one objects to this. It is the way things should be. Go back a thousand years into history and you will find that minting the coinage has always been the undenied responsibility of government. Monetary authorities are expected to intervene to ensure that the currencies of which they have oversight are sound ones.
If Mr Tsang and Mr Yam can make the case that, (1) their intervention was aimed at keeping a sound HK dollar, (2) it was properly thought out and, (3) it had a reasonable prospect of working, then Mr Greenspan's comments are wide of the mark.
