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posted on 30 November 2015

Hong Kong Dollars Now Include State Money

by Dirk Ehnts, Econoblog101

I have often heard ... people ... discuss the special case of Hong Kong where bank notes are issued by banks and not by the government.

Obviously, Hong Kong is part of China and might as well use renminbi. Apart from the fact that you have the inverse of the euro zone - one country, two currencies - the fun fact of bank-issued notes is now under threat. The Hong Kong Monetary Authority (HKMA) has issued state money:

Notes and coins At the end of 2014, the total value of banknotes in circulation was $342.2 billion, an increase of 3.9% from a year earlier (Charts 5, 6 and 7). the total value of government-issued notes and coins in circulation amounted to $10.9 billion, up 4.4% (Charts 8 and 9). the value of the government-issued $10 notes in circulation reached $3.9 billion, of which 77% are polymer notes.

Which means that about one billionth part of the outstanding circulation of government-issued notes from Hong Kong is on my desktop. I don't plan to return it to circulation, so I hope that the deflationary drag is not a problem. I am afraid that HKMA can't get back their note under any circumstances - I don't plan to go and they probably won't come to Berlin. And so the hoard grows... (next year's macro students will have one more note to look at: a city government-issued bank note - made out of polymer! How does that compare to the Disney Dollar that I will have presented before? Money can be so interesting!)

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