Morning Must-Read: Paul Krugman: A Tale of Two Pegs

…and Hong Kong’s now look remarkably similar…. So is the Hong Kong dollar at risk of a franc-like event? No, it isn’t. There’s not a hint of pressure to drop the currency board. Why is Hong Kong different The answer…is that the institutional setup and history… plays very differently with hard-money ideologues… even though the facts… weren’t very different…. Swiss currency intervention looked to the usual suspects like activist monetary policy, runaway expansion of the central bank’s balance sheet, ‘printing money’ to debase the currency even if the goal was to keep it from getting stronger.

Meanwhile, Hong Kong has a currency board, which is the next best thing to the gold standard, so maintaining the peg… became a demonstration of stern Victorian monetary virtue…. It was the nagging from hard-money types that led to the debacle. Meanwhile, Hong Kong has managed to wrap the very same policy in libertarian clothes, and there’s no problem.