Although the time profile of the adjustment process is different, as is the degree of short-term pain involved, internal adjustment arguably leaves the economy leaner and fitter than it would if everyone could simply depend on depreciation to see them right. The second flawed perception was that the intervention by the authorities in the stock market in August 1998 represented a fundamental reversal of traditional non-interventionist policy. The mistake here was to fall into the trap of characterising Hong Kong as a place where the authorities never intervened. We have always made clear our preparedness to intervene for such purposes as promoting efficiency in the market economy, providing infrastructure, or providing necessary support for the most needy in society. But our emphasis has always been to keep intervention to the minimum. This may sound uncontroversial today; indeed, it is probably an attitude shared by most governments, including those here in Europe. But you should remember that when Hong Kong was first vigorously espousing this doctrine, perhaps 30 or 40 years ago, the vogue in most western countries was for the  1  BIS Review 23/2000  state to assume an expanding role in the economy. In keeping with Hong Kong’s principles, the stock market intervention in 1998 was specifically directed towards improving the operation of the market economy rather than perverting it: it was designed to frustrate market manipulation that would otherwise have led to serious market dislocation.
Euroland officials should perhaps consider how much a problem there is of substance and how much of perception, and address each as appropriate. Another factor that may contribute to scepticism over the euro concerns monetary policy. But there is not a lot that I would wish to say on the subject. You will appreciate that central bankers are not anyway the sort of people to make public assessments of one another! On the whole, I sense a feeling of some sympathy for the European Central Bank. In the technical sense it appears to have done most things right, in terms of keeping inflation under wraps and so preserving the internal purchasing power of the euro, but it has nevertheless had to preside over a substantial decline in the euro’s external value. Given that Euroland as a whole is a relatively closed economy, the decline of the euro may have caused more concern to outsiders than to insiders. It has certainly influenced international investor perceptions. My own observation, perhaps slightly cynical, of businessmen and investors is that they are less concerned about the technical content of monetary policy - provided that it is seen to be reasonably disciplined - than they are about the conviction with which it is delivered. Thus, the so-called “strong dollar” stance of the United States is clearly stated. It is not contradicted from anywhere within the administration.