Beware the unintended consequences of property-cooling measures
Shirley Yuen says move to target speculators is also unfairly penalising the business community
John Mauldin, a US financial expert, wrote recently about the annual Darwin Awards, given out "to honour fools who kill themselves accidentally and remove themselves from the human gene pool".
"The 2009 award went to two bank robbers," he wrote in a weekly economics e-letter. "The robbers figured they would use dynamite to get into a bank. They packed large quantities of dynamite by the ATM machine at a bank in Dinant, Belgium. Unhappy with merely putting dynamite in the ATM, they pumped lots of gas through the letterbox to make the explosion bigger. And then they detonated the explosives.
"Unfortunately for them, they were standing right next to the bank. The entire bank was blown to pieces. When police arrived, they found one robber with severe injuries. They took him to the hospital, but he died quickly. After they searched through the rubble, they found his accomplice.
"It reminds you a bit of the immortal line from the film, The Italian Job where robbers led by Sir Michael Caine, after totally demolishing a van in a spectacular explosion, shouted at them, 'You're only supposed to blow the bloody doors off!'"
Mauldin used the story to illustrate how central bankers, in their attempts to reflate the economy, got more than they bargained for in the process.
In Hong Kong, recent policy mandates introduced by the government in the name of cooling the red-hot property market could have the sort of unintended consequences that would undermine our ability to compete more effectively. Instead of just taming unwanted market gyrations (or only blowing off the doors), we risk losing our hard-earned reputation as a laissez-faire economy (blowing up the entire bank and ourselves with it).
Make no mistake, the administration's resolve to act decisively to combat market exuberance and suppress speculation is applaudable. After all, homeownership is a common aspiration among Hongkongers and the quantum-like leaps in property prices in a short space of time simply do not sit well with such goals.