Imagine a frightening scenario where Hong Kong suffers from massive capital outflows. The stock market plummets, property prices tumble and confidence evaporates. To protect themselves, residents instinctively convert their Hong Kong dollar savings into safer currencies such as US dollars and euros. In an effort to stem the outflow of money and maintain the US dollar peg, the Hong Kong Monetary Authority is forced to propel borrowing rates to astronomic levels. This policy response has the…