Getting To Know Our Honorary Fellow, Dr John Greenwood, SBS

Published on 7 October 2020

Q: What is the thing that you are most passionate about at work? What motivates you?

A: As an economist working for an asset management company I am primarily interested in the impact of monetary and fiscal policy on the business cycle. By “business cycle” I mean the whole chain of events starting with a sustained change in monetary growth and its transmission through asset prices to economic activity and finally to consumer price inflation.

I am passionate about these ideas mainly because they have proven highly successful in understanding the world economy and positioning portfolios for optimum returns. However, the economics profession has by and large discarded them in favour of some much less reliable theories such as interest rates or the “Phillips Curve” (the idea that the best way to predict inflation is from wage increases) or output gap analysis. I am motivated by and gain great satisfaction from my ideas being proved correct in the financial markets and in the economy.

Q: Tell us an accomplishment that you are most proud of.

A: In my professional life the stabilisation of the Hong Kong dollar in 1983 is my proudest achievement.

The re-establishment of a Currency Board as the basis for the Linked Exchange Rate System was an idea that was strongly opposed by the consensus of economists in Hong Kong at the time as well as by numerous senior policymakers in Hong Kong. Yet I had researched the idea thoroughly and gained crucial academic support from Milton Friedman and Alan Walters (economic adviser to Margaret Thatcher).

As a result, I was confident that my idea would not only work, but that once established, the Hong Kong exchange rate would be safe for many years to come, no matter what economic, political and social unrest Hong Kong might face. The past two years in Hong Kong have certainly proved that to be correct!

Q: What is your advice to young practitioners or students who are keen in joining the financial services industry?

A: My advice to any young financial professional or student of finance is always to “follow your passion.” Find an area in finance that interest you and make it your specialty.

Many young people are misled by being told that finance is only for those who are highly skilled in mathematics or computer coding or accounting or securities regulation. The truth is very different.

In my career I have seldom used advanced techniques of econometrics or statistics. I have relied much more on my basic understanding of individuals, firms and markets. When you think about it, any economy is comprised of firms (public and private) and individuals who have interlocking balance sheets. In other words, they hold assets that may be liabilities of others, or they have liabilities that they owe to others, and they conduct transactions that are basically very simple – purchases or sales and loans or borrowing. My proposal to stabilise the Hong Kong dollar in 1983 relied primarily on these kinds of balance sheet inter-linkages between the monetary authority, the banks and bank customers, not on complex mathematics!   

Q: Kindly share with us your experience at/with the HKSI Institute.

A: I have been giving lectures at the HKSI Institute for over ten years as part of HKSI Institute’s lunchtime educational seminars. It is always enjoyable to present and discuss my ideas with industry professionals and HKSI Institute committee members in Hong Kong at these events.

Normally I have presented topics based on my research findings about the global macro economy such as major developments in the US, the Eurozone or Japan or Emerging Asia, and usually concerning the impact of monetary policy on the medium-term outlook for asset markets, economic growth and inflation.

I have always found that participants at HKSI Institute events are keen to learn new insights on the global economy. Their questions always show a high level of interest and challenge me to present my ideas more clearly to members of the Institute.

Q: How do you see HKSI Institute contributing to Hong Kong’s role as a leading international financial centre?

A: HKSI Institute has contributed to the development of financial industry in Hong Kong for more than two decades. It is dedicated to upholding professional standards for the financial industry, which is important in delivering quality services to clients and investors. By offering a variety of resources, such as training and seminars, it also helps promote a culture of continuing education among the financial community and equip the practitioners with up-to-date financial knowledge. All these are the prerequisites for Hong Kong to maintain its position as a global financial centre.

I am confident that HKSI Institute will continue to play a key role in the success of Hong Kong as a regional financial hub in Asia Pacific.