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  "documentTitle": "Hong Kong Dollar / Hong Kong Monetary Authority (HKMA) (HKD)",
  "authorId": "01_Pershing_Square",
  "authorName": "Pershing Square Capital Management",
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  "presentationDate": "2011-09-14 00:00:00",
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  "notes": "This appears to be a page from a formal report or policy document (numbered 8, 9, 10).",
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      "text": "Essentially the scheme transfers the pressure of a run out of the local currency away from the exchange rate onto the banking system and thus to borrowers.",
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      "text": "8 If the new arrangement attracts total confidence and credibility - i.e. in the belief that it will endure - there will no longer be any incentive for people to rush out of Hong Kong dollars in the short-term, even though political worries if continued would occasion a steady outflow of capital over a number of years. In other words, confidence in the currency, but not necessarily in the future nor hence in Hong Kong assets, would have been restored, and the introduction of the scheme would not impose any intolerable strains.",
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      "text": "10 Essentially the scheme transfers the pressure of a run out of the local currency away from the exchange rate onto the banking system and thus to borrowers. The level of local currency interest rates has to rise to a point where the continuing outflow into foreign currencies by residents is matched by an offsetting inflow by banks and other speculators. If the banks will not increase their exposure in Hong Kong, and the public's desire to diversify into foreign currency is very strong, then interest rates would have to rise sharply. Without any such scheme, however, in such circumstances the exchange rate would be falling sharply, and that would also lead to domestic interest rates rising markedly, though perhaps not so quickly. It is essential to realise that the extent to which domestic Hong Kong interest rates may rise will depend on confidence in the scheme itself. If bankers, businessmen, foreigners, etc., were really confident that a linked rate against, say, the dollar would be maintained for, say, six months, then they would bring in extra US dollar funds until the Hong Kong dollar six month interest rate was brought into line with the US",
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      "text": "9 In practice, however, there will probably be some initial scepticism and miscomprehension, however deftly the all-important presentation is handled. To the extent that people perceive the arrangement as a chance to get out of Hong Kong dollars quickly at a relatively generous rate, pressures could develop.",
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      "text": "base of the banks. Initially they may be able to draw on surplus available liquid foreign currency assets, but if the drain continues they have to react more forcefully. Their reaction will take the form either of bringing in to Hong Kong additional foreign currency, if the return and risk prospects merit it, and/or raising interest rates on Hong Kong dollar deposits and loans to stem the drain.",
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