Rebirth of the Industrial Tycoon - Vol 2 Chapter 512
Chapter 512 Nonsense prediction
The next day, Li Weidong came to the meeting place, and saw that Situ Jian had already arrived in the meeting room.
Li Weidong hurried forward to greet him, and after a few greetings, he asked; “Teacher Situ, you said on the phone that international financial speculators have already arrived. What’s the matter?”
Situ Jian immediately explained: “Did you not say before that once Thailand abandons the fixed exchange rate, the Thai baht will be attacked by international financial speculators?
Although Thailand has not given up on the fixed exchange rate, the international financial speculators attacked the Thai baht, but you predicted it. Just in mid-May this year, the Thai baht was once again under a large-scale attack.
International financial speculators obtain funds by borrowing Japanese yen and then depositing Thai baht to conduct arbitrage foreign exchange transactions. The exchange rate for borrowing Japanese yen is only 3%, while the overnight interest rate for depositing Thai baht is as high as 17%, and the interest rate difference is 14%.
The Bank of Thailand directly invested tens of billions of dollars, and asked for assistance from the Monetary Authority of Singapore and the Hong Kong Island Monetary Authority, which eventually repelled international financial speculators and stabilized the exchange rate of the Thai baht.
However, after calculation, the international financial speculators probably used only US$300 million to leverage Thailand’s tens of billions of US dollars in foreign exchange reserves. If the other party uses more funds, Thailand will lose this battle.
The details of this incident were announced at a summit of Asian central banks in late May. At that summit, the Bank of Thailand hoped that all countries could help Thailand and fight against international financial speculators.
To put it plainly, I want to borrow money from various countries and borrow US dollars to maintain the exchange rate of the Thai baht. But the central banks of all countries are not fools, who wants to use their own money to fill the hole in Thailand! In the end, the summit ended without a problem.
According to the information released by Thailand, the international financial speculators who attacked the Thai baht this time mainly came from Wall Street, including investment banks such as ****, Citi, Goldman Sachs, and hedge funds such as Quantum Fund and Tiger Fund.
You should be aware of investment banks like Citigroup and Goldman Sachs. Quantum Fund and Tiger Fund, you may not be familiar with them. They are all internationally renowned hedge funds. They are like Wall Street vultures, treating the world’s financial markets as the world’s financial markets. It’s own prey! ”
“I also heard about these two hedge funds. The Quantum Fund was founded by George Soros. This guy shorted the British pound when the two Germanys were reunified, and made a billion dollars in madness and became famous in the First World War.”
Li Weidong paused, and then said: “The Tiger Fund was established by Julian Robertson. He is the godfather of the hedge fund industry. Tiger Radical has always invested in’value investing’ and invested in the stocks of listed companies. .
But this time, the profit from attacking the Thai baht is obviously large enough that even the godfather of hedge funds can hardly resist the temptation to start arbitrage foreign exchange transactions. ”
“Unexpectedly, you have also studied foreign hedge funds!” Situ Jian lowered his voice and asked with a serious face: “Tell me honestly, are you also involved in foreign hedge fund investments?”
Li Weidong hurriedly shook his head: “I am in business, and I don’t touch things like finance.”
“That’s good, if you really get involved with foreign hedge funds, I really dare not let you participate in today’s meeting.” Situ Jian said.
Li Weidong continued to ask: “Teacher Situ, you have been attacked again for the Thai baht just now, which means that the Thai baht has been attacked before?”
Situ Jian nodded: “This time in mid-May, this is the second attack on the Thai baht this year. The first was in February, and it was in July last year. The attacks were all the same. Borrow Japanese yen to get funds, and then deposit Thai baht to earn overnight interest rates.”
“Who makes the interest rate of the Thai baht so high! And Japan is Thailand’s largest creditor. I remember that more than half of Thailand’s foreign debt is Japanese yen. It is easier to attack the Thai baht with the Japanese yen than to attack the Thai baht with the US dollar.” Li Weidong said.
Situ Jian lightly sighed: “Yes, Thailand now wants to stabilize the exchange rate of the Thai baht, so it can only use U.S. dollars to fill the hole. But now Thailand’s foreign exchange reserves are almost unable to hold up. At the end of last year Thailand still has more than 37 billion U.S. dollars in foreign exchange reserves. After the last two attacks, their current foreign exchange reserves are probably less than 7 billion U.S. dollars.
Therefore, they have only two ways to go. One is to restrict the free flow of capital and control foreign exchange. As long as the exchange of foreign exchange is restricted, it is impossible for international financial speculators to use the means of lending out Japanese yen and depositing Thai baht to carry out arbitrage. Foreign exchange transactions.
The second is what you said before. Abandon the fixed exchange rate and switch to a floating exchange rate. Once the Thai baht depreciates, the 14% interest difference can be eliminated. Arbitrage foreign exchange transactions are naturally unprofitable.
And our symposium this time is also discussing these two possibilities, and at the same time, we must also discuss what negative effects these two possibilities will bring to our financial system. ”
“No matter what kind of response method Thailand adopts, shouldn’t the negative impact on our country’s financial system be significant?” Li Weidong frowned slightly, then said;
“Our country’s finance is not in line with the world. Foreign exchange is controlled by the country, and the exchange rate can also be intervened through regulatory measures. Simply put, people eat steak, we eat cabbage, and whether the steak is good or not, it has something to do with cabbage. What’s the matter!”
“Xiao Li, what I mean by’we’ is not what you understand. Don’t forget, it will be July 1st soon. By July 1st, we will take back Hong Kong Island. Finance is also related to us!”
Situ Jian smiled slightly, and then said: “Hong Kong Island’s financial system is completely open, and Hong Kong Island is still Asia’s financial center. If the Thai baht is attacked, it will definitely affect Asia’s finances, and naturally it will also affect Hong Kong Island. ”
Li Weidong thought about it carefully, and said: “Hong Kong Island is also a fixed exchange rate. The Hong Kong dollar against the US dollar has always been stable at around 8.3 to 1. Is the leader above worried that Thailand’s affairs will also fall on Hong Kong Island?”
“You guessed it, the leaders have this worry. Hong Kong Island has just returned, and it needs stability the most.” Situ Jian nodded.
“The leader really is foresight!” Li Weidong said.
Situ Jian said: “Okay, now that you know the content of this meeting, you are ready to prepare, and when everyone is ready for a while, let’s have a meeting!”
……
After a while, the participants are almost there. Most of them are experts in the field of domestic economics. The professor Huang Liwei from the Central University of Finance and Economics that Li Weidong knew before also came.
Some of these economic experts are known to Li Weidong, and some Li Weidong does not. Situ Jian introduced them one by one.
In addition, there were some observers sitting around. These people were probably not important, so they did not introduce them.
The meeting began. First of all, everyone discussed whether Thailand will adopt foreign exchange controls or adopt floating interest rates in response to attacks from international financial speculators.
Many economists believe that Thailand will offer foreign exchange control methods, which are simple and effective, and will not do much harm to the country’s economy.
After all, China adopts the strategy of foreign exchange control. Everyone saves others by oneself, and instinctively thinks that foreign exchange control is a normal thing.
At that time, China’s economy was not yet in line with the international economy. The information available to domestic economists was limited. Few people could go abroad to gain in-depth understanding of foreign economic conditions. There were still many factors on paper.
After discussing for a long time, Situ Jian finally asked Li Weidong: “Chairman Li, you predicted a few years ago that international financial speculators would attack the Thai baht and thought that Thailand would abandon the fixed exchange rate system. Now your predictions are correct. Half of it is fulfilled, and you have to talk about the basis of judgment for the other half, right?”
Li Weidong stood up and said, “Every teacher is an expert in the field of economics. I have limited skills in this area. Among you, I am even more troublesome. Something is wrong. You should be ugly!”
After being humble, Li Weidong continued: “I think Thailand will abandon the fixed exchange rate, the main basis is that Thailand believes in Western economic liberalism.”
“Chairman Li, this is not an economic judgment!” someone next to him said.
“Teacher Liu, I know, you are saying that my judgment is not scientific, it is just a judgment of subjective will.” Li Weidong smiled slightly, and then said;
“For so many years, the West has been advocating their economic liberalism, and capital control does not conform to the values of the Western world. If you talk to a Western economist about capital control, he will definitely laugh at you!
Thailand has always implemented a policy of economic freedom, and the degree of financial openness in Thailand is not inferior to that of Singapore. If currency control is to be carried out in Thailand, it is unbelievable in the eyes of Thais.
I also admit that Thailand believes in economic liberalism without any economic basis. This is not a scientific judgment.
But this is the reality. Western countries have more developed economies, and they have the right to speak in finance. The economic forms they promote are also easier to gain the trust of countries around the world. ”
Liberal economism is an economic theory and policy system that opposes the country’s daring to take the economy and advocates free competition.
In the eyes of liberal economists, a country’s best economic policy is not to interfere in the economy in any way. Free economy, free competition, and free trade should be implemented. The role of the state is limited to maintaining national security.
In the nineteenth century, this theory was very popular.
Western countries use free tradeism to dump goods all over the world. After all, the productive forces of Western countries were in an advantageous position at that time. Under the system of free competition and free trade, they had an absolute advantage.
During the two world wars, Keynesian state interventionism emerged.
During the Great Depression in the 1920s and 1930s, Roosevelt used state intervention to quickly recover the US economy. This successful case made Keynesianism replaced liberal economicism and became the mainstream at the time.
After the end of World War II, the world economy began to recover, and liberal economism once again made a full comeback.
At this time, Western productivity is still in an advantageous position. They need to dump products to the world, and naturally they have to start to sell liberal economism all over the world.
Since the 1980s, the political situation in the entire Southeast Asian region has been relatively stable, the economy has developed significantly, and the savings rate of the people in Southeast Asia has been relatively high.
Since the people in Southeast Asia have money in their hands, of course it is a good place to dump goods, so Western countries began to frantically promote liberal economism in Southeast Asia.
Thailand was the first to be deceived. Thailand first opened up the economic field, and then opened up the financial field. By the 1990s, there were almost no restrictions on foreign capital in Thailand’s financial sector.
Thailand in the 1990s opened up foreign banks to directly absorb deposits and loans from abroad, and allowed free use of these foreign exchanges in Thailand.
Also in the 1990s, Thailand allowed foreigners to borrow, lend, and exchange currency freely in Thailand.
In addition, Thailand will open the domestic stock market and bond market to the outside world, without any restrictions on foreign direct investment.
It’s just no restrictions. Thailand has also taken the initiative to give the green light. They require financial institutions not to control the scale of foreign debt and relax supervision. This can be the free borrowing of foreign debt by enterprises.
Thailand’s foreign exchange market has also opened up forward trading, which is the favorite game of financial speculators.
This series of financial opening policies, from the perspective of Zhuge Liang after the fact, every one of them is dying, and it is clear that you are invited to do arbitrage foreign exchange transactions.
In the eyes of international financial speculators, this is a dream thing. Thailand is tantamount to stripping its own financial industry to the hands of financial speculators.
In the future, the financial sector of a country is open as long as it is open. If foreign capital wants to enter these fields in a certain country, it has to trade things for it. Trade, tariffs, investment, technology, etc., are all bargaining chips.
For example, if you want to get a free loan in my country, do you want to import some of my goods, do you want to lower some of my tariffs, do you want to invest in my country, or give me some technology?
Open up, it has to be open to each other. There is no mutual benefit, who will talk to you openly!
How can there be such a stupid as Thailand, a sentence of free economy, it has been fooled to open up.
Brainwashed by Western countries for so many years, the idea of a free economy has penetrated into the bones of Thailand. For Thais, such things as foreign exchange control are completely unconsidered options.
Believing excessively in liberal economism also made Thailand the fuse of the Asian financial crisis.
The so-called flies do not bite seamless eggs, Thailand’s eggs have seams, and it is inevitable to attract flies. Whenever there is a little turmoil in the world economy, Thailand will definitely suffer.
In addition to the 1997 Asian financial crisis, the subprime mortgage crisis in 2008 caused the Thai economy to suffer; the oil price fluctuations in 2014 caused the Thai economy to suffer; the global epidemic in 2020, the Thai economy suffered again.
In the future, the energy transition brought about by carbon neutrality worldwide, the Thai economy will definitely suffer.
……
Listening to Li Weidong’s remarks, several economists in the conference room frowned. They seemed not to agree with Li Weidong’s views, but they were not easy to refute.
Western countries have the right to speak in the world economy. This is indeed a fact. It is also true that Western countries are advocating liberal economism.
Thailand’s behavior in the past ten years is indeed the practice of liberal economicism desperately.
At this time, Professor Huang Liwei asked: “Chairman Li, when do you think Thailand will abandon the fixed exchange rate?”
“Just now, Academician Situ told me that Thailand’s foreign exchange deposits can no longer hold up. According to the current trend, Thailand spends hundreds of millions of dollars every day to maintain the exchange rate of the Thai baht. So I concluded that Thailand will abandon the fixed exchange rate in early July. exchange rate.”
Li Weidong did not wait for everyone to ask questions, and then said; “The reason I made this judgment is that apart from the fact that Thailand’s foreign exchange deposits are already low, there is another reason.
July is the beginning of the second half of the year and the beginning of the third quarter. In July, financial institutions have completed the first half of the settlement. At this time, the introduction of a new monetary policy will have a smaller impact on the financial level.
In the first week of July this year, only the 1st to the 4th are working days. On the 1st, the financial system should still be in the last quarter, and on the 4th, it will face the weekend. So I think the 2nd and 3rd of July will be a reasonable time to change the monetary policy. ”
“Even the date has been calculated!” Professor Huang Liwei smiled slightly, and then said: “It’s not a few days since July. Let’s take a look at that time. Are you sure about it?”
Other economists also smiled and shook their heads. Some even showed dismissive expressions, but for the sake of face, they were not arguing with Li Weidong.
It is normal to predict Thailand’s abandonment of the fixed exchange rate. Many people on the scene have such predictions.
can be predicted to a certain date, which is a bit nonsense!
Updates are delivered today, thank you parents for subscribing, ask for a monthly pass in Poland, thank you for passing the customs!
(End of this chapter)