George Bernard Shawonce said: “If history repeats itself and the unexpected always happens, how incapable must man be of learning from experience?” Never a truer word was spoken in terms of Hong Kong’s current economic predicament.

Hong Kongis one of the few countries in Asia Pacific with a pegged currency, being pegged to the US dollar. The peg has been around in one form or another since 1935; however, Hong Kong’s currency was originally pegged to sterling to reflect the then global reserve status of the pound. By 1972, the US dollar was in the ascendancy, and after a brief swop to a US dollar peg, the currency was allowed to freely float in 1974. Then, in 1983, in a crisis of confidence that led to near runs on the banks, the US dollar peg was reinstated in a modified form and has been with us ever since. The ability for the Hong Kong Monetary Authority to buy and sell the US dollar to maintain a defence against excessive capital inflows and outflows h