These are difficult times and should require high alert and extraordinary measures when necessary.

consecutive months of recession. Finally, it was the Closer Economic Partnership Arrangement and flood of mainland visitors that saved the day.

Recently we saw the Hong Kong dollar constantly going weak against the alreadyweak US dollar. The Hong Kong Monetary Authority told us not to worry as this is the natural outcome of rising interest rates in the US. Because the Hong Kong dollar is pegged to the US dollar, more and more will be converted into the US dollar to take advantage of the interest-rate differential. The out-flowing funds are idle money just happened to park here and it is not consequential whether it is here or flowing out. In any case, they have intervened in the market when the Hong Kong dollar hit a prescribed low.

I agree this might be true because they are the authority and should know better than us ordinary folks. But monetary matters are very tricky and in the final analysis it is a matter of perception. If a lot of people start to panic for no real reason at all, it will become a real panic. Even a small rumor could spark a rush to convert Hong Kong dollars into US dollars. Should that happen, the avalanche could only be stopped by a big and sudden hike in our interbank rate to the tune of several hundred percent per day as in 1998, bringing a subsequent backlash in the economy.

These are difficult times and should require high alert and extraordinary measures when necessary. The officials in the monetary authority are not living in an ivory tower, and they should remember many of us are not that rational. A gradual increase in interest rates in line with the US will do us not much harm, at least not as much as otherwise.