The next global financial crisis looms as coronavirus batters demand, warns former Hong Kong Monetary Authority chief Joseph Yam
- The former head of Hong Kong’s de facto central bank has full confidence in the local currency’s peg to the US dollar
- Yam worries central banks’ money-printing programmes will lead people to spend beyond their means
The world stands on the cusp of its third financial slump in a quarter of a century, as the cash unleashed by central banks is insufficient to stem the shrinking consumption caused by the coronavirus pandemic, said the former official who steered Hong Kong’s capital markets through the previous crises.
Additionally, the “problematic” quantitative easing – essentially printing money – by central banks may lead people to spend beyond their means, warned Joseph Yam, who was chief executive of the Hong Kong Monetary Authority (HKMA) from 1993 to 2009, in one of a series of online interviews organised by the de facto central bank.
“I fear that the third financial crisis may be on the horizon,” Yam said in a video posted on YouTube by the HKMA. “It is because a virus occurred, and then everything had to stop. Now this one is not easy to handle.”
The outbreak started to emerge in January and has now infected over 16 million people globally.
The health crisis, together with US sanctions imposed on Hong Kong after Beijing introduced the controversial National Security Law, has led many to worry about the local currency’s 36-year old peg to the US dollar.
Yam said he is fully confident in the resilience of the peg, which he helped establish in 1983.