Cooperating with London to seize global capital market opportunities is one of Hong Kong’s solutions
The position of the United States in the postwar global financial and monetary system was not entirely due to its demands. To a certain extent, it was imposed on it by its allies. In the long run, there is room for discussion as to whether the United States is the most suitable country to play this role.
Author: GUDORDI | 2023-12-04
If Britain’s economic strength had not been severely damaged by the First World War, could it have continued to update the relevant systems? Would the global capital markets be very different today? (Shutterstock)
Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes a bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.
— John Maynard Keynes
In financial history, one of the great mysteries is the Great Depression of 1929 in the United States and why it lasted so long and had such a profound impact. However, after nearly a century of research, we should know a lot more about relevant issues than before, and a consensus is that the U.S. Federal Reserve, which was only established in 1913, failed to control the stock market crash and the subsequent banking crisis. The crisis was dealt with by causing the U.S. money supply to continue to shrink, triggering a vicious cycle. There is no doubt that the Fed’s handling of the problem made the problem far more serious, but it is not the root cause of the crisis. Perhaps, it is worth asking again: Are there any deeper reasons besides this?
Without World War I, would global capital markets be very different today?
John Hicks, the 1972 Nobel Prize winner in economics, made a very special point in his speech in his later years, that is, the emergence of the Great Depression in the United States in 1929 and the economic difficulties of the European economy during the two wars may have It is related to the failure of the gold standard system, which began in 1717, to adapt to changes in global trade and political and economic conditions. This is a very original point of view. Unfortunately, Heath did not formally write a paper on this idea, so we do not know much about the details of this idea. However, considering the major changes in global trade and political and economic conditions over the past 200 years since 1717, this point of view should be an angle worth pondering, right?
For more than 200 years since 1717, Britain has been the main maintainer of the gold standard system. (Shutterstock)
It is worth noting that for more than 200 years since 1717, the United Kingdom has been the main maintainer of the gold standard system, and it should also be the country most suitable to play the relevant role. The United Kingdom was the world’s economic and financial superpower at that time, and had The world’s largest fleet and controls global maritime trade. In fact, the system has worked well for more than a hundred years since 1717. Therefore, a question worth pondering is whether Britain would have been able to continue to update the relevant systems if its economic strength had not been severely damaged by the First World War. If so, would the situation in global capital markets today be different? Big difference?
Over the past 100 years, global capital markets have developed and evolved under a rather special monetary and economic background.
Of course, the above question is just a hypothesis. The fact is that Britain’s economic strength was severely damaged in World War I. In 1944, Keynes, Churchill and others understood that the only way out for global economy and trade was to win over the United States and use its economic strength to help promote the recovery of global trade. and European reconstruction. From this perspective, the position of the United States in the post-war global economic, financial and monetary system is not entirely due to its requirements, but to a certain extent, it is imposed on it by its allies. In the long run, whether the United States is the best There is room for discussion as to whether the country is suitable for playing the relevant role.
After considering the above circumstances, perhaps we will not be surprised that US President Nixon later announced in 1971 that he would abandon the Bretton Woods Conference’s commitment to dollar convertibility. But as a result, the world has entered a legal currency (Fiat Money) – that is, an era in which countries around the world can theoretically print silver paper at will, and what follows is a huge increase in the global money supply. In the past few decades, global financial and capital markets have developed and evolved in the context of monetary economics.
In 1971, the United States announced that it would abandon its commitment to converting U.S. dollars into U.S. dollars at the Bretton Woods Conference. As a result, the world entered an era of legal tender (Fiat Money). In theory, countries can print silver paper at will. (Shutterstock)
From this point of view, the emergence of the First World War disrupted the natural evolution pace and order of the global economic system and capital market. Over the past 100 years, the global finance and capital market have been in a rather special situation. evolved in the context. The development of many things seems to be expedient arrangements made step by step. The author’s opinion is that this special background has led to many suboptimal situations in today’s global capital market. Keynes’s views quoted at the beginning of this article indicate that as early as the 1930s, he had clearly felt that the global capital market was not developing on a healthy path. The problems in global capital markets today should be more serious than what Keynes saw in the 1930s. The deficiencies in the global capital market should theoretically provide opportunities for the development of the Hong Kong capital market.
Hong Kong’s current financial strength alone may not be enough to be able to stand on its own
However, it is worth noting that in the past few decades, the development of Hong Kong as an international financial center was mainly based on the vigorous development of one business, which was to help large domestic companies go public. However, in the financial field other than IPO, Hong Kong, London and New York In fact, there is still a lot of distance between them. Hong Kong’s current financial strength alone may not be enough to be able to stand on its own. On the other hand, given the current global political and economic situation, the listing of large domestic companies may not come back for a long time. Under this circumstance, working together with London to seize opportunities in areas where the global capital market has not done well may be a direction that is beneficial to both parties. Especially after Brexit, the UK may need to pay more attention to opportunities from the East. . Strengthening cooperation with London should also be a direction that can enhance Hong Kong’s level as an international financial and business center.
Of course, the financial market is a place where strength is important. If you want to cooperate with others, you must be attractive enough to others. This also extends to another bright light on the issue of Hong Kong’s future, which is Hong Kong’s own Chinese culture – what is its essence and how it can help the development of Hong Kong’s capital market and its integration with London, thereby initiating a greater power. More on this next time.
“Hong Kong’s Legendary Future” Series 44
Contact the author: Gudordi@proton.me
