Rebirth of the Financial Overlord

OneCanadaSquare thirty-sixth floor, Capital One (London) investment company.

The comprehensive meeting room of more than 100 square feet has a spotless marble floor and a white suspended ceiling. The most expensive Daikin central air conditioner in the world is used.

On the wall in the central area of ​​the office, a LitePro series projector is hung, and rows of writing are clearly displayed on the fluorescent screen.

ERM, European Community Exchange Rate Mechanism.

According to the European Monetary System, the currencies of Western European countries are no longer pegged to gold or the U.S. dollar, but to each other; each currency is only allowed to float within a certain range of exchange rates. The central bank has the responsibility to intervene in the market by buying and selling its own currency to stabilize the currency exchange rate of the country within the specified range;

Within the specified floating range of exchange rates, the currencies of the member states can float relative to the currencies of other member states, and the exchange rate between the currencies of the member states is centered on the Deutsche mark.

Beside the ten-meter-long oval conference table, Shen Jiannan, Robert, John, and the core members of Capital One London, William, Andy Smith, and Yu Zheng sat quietly on chairs, facing the panel of the projector.

William's secretary, Mary Snow Hunter, wore a well-fitting suit and held a pointer to explain the basic concepts supplementing the EC's exchange rate mechanism.

"The exchange rates of member countries' currencies set a fixed central exchange rate, allowing the exchange rate to fluctuate within a certain range above and below the central exchange rate.

The aim is to mitigate currency fluctuations in Europe so that companies can invest and trade without fear that wild exchange rate swings could jeopardize their business models.

For more than a decade, this mechanism has worked well, stabilizing the currency without unifying it to the extreme.

All participating currencies allow small fluctuations in their exchange rates against each other, and if there is not enough flexibility, a country can negotiate devaluations with its European partners. These rules provide some governments with the possibility of using interest rates to manage the business cycle. This system balances the goals of exchange rate stability and interest rate flexibility. "

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Of course William's secretary is not ugly. Marie, who is just 22 years old, is young and beautiful. Her delicate facial features, graceful curves and crisp voice make people feel amazing both visually and audibly. It feels very comfortable.

Her basic skills are also very solid. As a top student at the School of Economics of Cambridge University, it is not a piece of cake to describe an exchange rate mechanism.

Soon after Mary Snow Hunter finished explaining the basic concepts, she glanced at the current big boss.

Shen Jiannan nodded his head in approval, then turned around and asked the people sitting there.

"For ERM, what do you think?"

Several people present looked at each other in blank dismay, except for William, who probably knew it, and didn't understand what his boss meant for a while.

Shen Jiannan raised his eyebrows, took out a cigarette and lit it without restraint.

The smoke flowed into the lungs along with the breath, eroding the body time and time again, and when it had been wandering in the body for a week, this guy was very unscrupulous and sprayed second-hand smoke to everyone present.

"In this way, let me put it another way. In the ERM exchange rate system, what do you think is flawed in it?"

The guys present are all human beings.

Savoring Shen Jiannan's words carefully, he guessed his purpose of calling everyone to a meeting in the middle of the night.

Soon, someone spoke.

Andy Smith, a Swedish currency expert, has been affiliated with the Riediant hedge fund for the past ten years.

Now, he is the investment manager of Capital One.

"From the perspective of the exchange rate mechanism, the biggest problem is the communication between the member states, and there is a certain gap in economic strength among the countries. The linkage mechanism will cause some deviations in exchange rate coordination."

"However, this problem is not very big. The central banks of various countries have the responsibility to maintain this coordination of exchange rates."

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Shen Jiannan was quite satisfied with Andy Smith's reaction. If he couldn't even see this basic problem, the annual salary of $300,000 a year would be as good as raising a pig.

Taking another puff of the cigarette, Shen Jiannan pressed the end of the cigarette and said with a half-smile.

“And what if central banks are powerless to intervene in this currency coordination?”

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Pairs of eyes, big eyes stared into small eyes, apart from Robert John who was a little confused, William and Andy Smith couldn't help swallowing.

Shen Jiannan laughed terribly.

Both of them are smart people. William, as the head of London, probably already has a guess, and Andy Smith, as a currency expert, also has a keen sense of something.

"OK. I think you already know my purpose. At present, the merger of Germany has created a huge loophole in the system. With the current strength of the Mark, both the pound and the lira are facing great pressure to depreciate. Now, let's analyze how we can exploit this vulnerability to make a lot of money."

Gudong!

Gudong!

People are most afraid of Lenovo.

Reminiscent of the operations that Shen Jiannan had asked himself to perform, William and Andy Smith swallowed together.

"Boss. Are you trying to sell England?"

Snapped!

Shen Jiannan snapped his fingers and gave Andy Smith an approving look without hesitation. To be able to guess his purpose so quickly, the title of currency expert is not considered a white belt.

In the late 1970s, affected by the oil crisis, the British economy fell from the world's factory into a peat swamp. With Mrs. Thatcher in power to promote privatization, the British economy temporarily escaped from the downturn.

However, just after the recession came, due to the privatization reform process, a large number of state-owned assets were sold to the capital of other countries at a low price, and the market was transferred from the British mainland to the European market and the North American market. However, the financial crisis broke out in the United States and the economy Once in a downturn, with the decline of the North American market, the British export industry was severely restricted, causing a large number of ordinary people to lose their jobs.

According to the latest statistical report of the National Bureau of Statistics of the United Kingdom, the GDP growth rate in the third quarter of 1991 in the United Kingdom was even worse than the zero growth in the second quarter, which was negative 0.5%, the largest drop since 1990. The report shows that the annual GDP growth rate in the third quarter of last year was 0.3%, a 16-year low.

Data show that in the first three quarters of this year, British industrial production fell by 0.72% month-on-month, of which the weakness in the manufacturing industry was the most obvious, with a quarter-on-quarter drop of 1.0%. At the same time, industrial investment also fell by 5.41%, the largest in 23 years decline. Not only that, the output of the service sector, which accounts for two-thirds of the UK's GDP, fell by 0.4% in the third quarter.

The European Exchange Rate Mechanism was formulated by the European Economic Community in 1979, which limits the exchange rate fluctuation range of eleven European currencies. However, this exchange rate mechanism has a fatal weakness: countries must coordinate economic policies with each other to keep fundamentals close to each other.

If the British inflation rate is higher than that of Germany, it will put pressure on the exchange rate mechanism, and the interest rate difference between the two countries will also impact the exchange rate mechanism.

So here comes the problem. With the development of the Internet, the scale of transactions in the foreign exchange market has reached astronomical literacy. In the past, the ability of the central bank to intervene in the national currency with tens of billions of dollars in foreign exchange reserves has been greatly weakened.

Looking at Andy Smith with interest, Shen Jiannan said.

"Congratulations, you got it."

"But boss, that's the Bank of England."

Bank of England?

So what.