Reborn Industrial Tycoon

The words "financial crisis" are really scary to the economists at the scene.

In the eyes of economists, a financial crisis involving the entire Asia is like being chased by a serial killer. Even if you are hiding at home, you will be on tenterhooks and you will be awakened by nightmares when you sleep.

"Chairman Li, this is a proper discussion meeting, don't be joking!" someone said.

"I know this conclusion is hard to imagine, but I'm not joking." Li Weidong said with a serious expression, "Let me go back to the three questions that Secretary Chen just mentioned.

The first question is the impact of Thailand abandoning its fixed exchange rate. The current situation is the depreciation of the Thai baht. This is a short-term impact and is expected.

In the long term, my judgment is that Thailand's financial system will collapse, leading to an economic crisis in the entire country, and I predict that Thailand's economy will go back ten years."

Li Weidong's conclusion once again aroused some quiet discussion at the scene.

Then someone asked: "Chairman Li, it's just the depreciation of the Thai baht. Although it will have an impact on the economy, it doesn't mean that the Thai economy will retreat for ten years all of a sudden, right? Then wouldn't Thailand's economic development in recent years have been completely disrupted?

The water is floating!"

Li Weidong immediately explained: "Currency depreciation will cause a series of chain reactions. The first is the issue of debt. Thailand's open financial policy has caused their banking system and enterprises to have a large amount of foreign debt.

Among these foreign debts, only 10% are national debts, the rest are borrowed by the private sector, and half of them are short-term debts. If the Thai baht depreciates, the risks these short-term debts will face, all teachers should be very clear.

"

Of course, foreign debt is borrowed in the form of foreign currency, such as borrowing US dollars or Japanese yen. If it is borrowed in Thai baht, the Bank of Thailand can just print money.

Since the borrowing time is in U.S. dollars or Japanese yen, the repayment must also be in U.S. dollars or Japanese yen.

The depreciation of the Thai baht means that the amount Thailand needs to repay increases.

For example, if you borrow 100 US dollars, the exchange rate is 2,500 baht at the exchange rate of 1:25. Later, the Thai baht depreciated and the exchange rate became 1:50. Then, if you pay back 100 US dollars, you have to spend 5,000 baht to repay it.

During the Asian financial crisis, the Thai baht more than doubled in value, which directly doubled Thailand's foreign debt.

The increase in foreign debt alone is not the most serious thing. The most serious thing is that half of these foreign debts are short-term debts, which means that the repayment amount will double in the short term.

Borrowing for thirty years and paying back twice as much as borrowing for thirty days are two completely opposite situations.

The sudden doubling of tens of billions of short-term debt was beyond Thailand's ability to solve, and the result was an instant collapse of the entire financial system.

Short-term debt is not just a problem in Thailand, but across Southeast Asia.

After entering the 1990s, several major economies in Southeast Asia were deceived into opening up their domestic financial industries in a short period of time, instead of opening up step by step.

Although this kind of counterproductive policy has made it easier for Southeast Asia to obtain funds, it has also created a large amount of short-term debt.

Emerging markets are prone to short-term speculators, which is actually easy to understand.

For example, in the stock market, those investors who buy new stocks must be short-term players and leave as soon as the daily limit is reached. Only blue-chip stocks with stable performance will be held for a long time.

From the perspective of investors, the emerging markets in Southeast Asia are just stocks that have just been listed, so everyone is playing short-term, and the related debts are also short-term debts with high interest rates, pursuing short-term returns.

In comparison, a mature large economy like the United States often issues Treasury bonds for thirty years, and the annual interest rate for thirty years is only more than two points, but there are still many people holding them on a large scale. This is the so-called stable performance.

"Blue chip stocks".

Those present are all economists and know the impact of currency depreciation on short-term foreign debt.

But someone immediately said: "There are actually many ways to solve short-term foreign debt, such as raising the repayment interest rate and extending the repayment period; and borrowing new debt to repay old debt. As long as we can survive this period of debt crisis, it should not be a problem."

It is even more nonsense to let the entire financial system collapse and the economy go back ten years."

"You are right, but these methods all require money to solve. That is to say, Thailand needs a sum of external funds to help them resolve the debt crisis. The problem is that this requires tens of billions of dollars. Who can afford this money?

?" Li Weidong asked.

"Although tens of billions of dollars is a lot, the United States can still afford it," the man continued.

"This is financial assistance, not investment." Li Weidong said with a smile.

Everyone around them nodded. Based on everyone's understanding of the United States, if it was an investment, it would be profitable, and Americans might be willing to pay.

However, when it comes to economic aid, Americans have always been modest and gentlemen, speaking rather than taking action.

This is also true. After the Asian financial crisis broke out in Thailand, China assisted Thailand with US$2 billion. However, the United States did not provide any help to its former allies in the Vietnam War. Instead, it required Thailand to disclose US$30 billion in foreign exchange commitments.

The man then retorted: "Even if the United States does not take action, there is still Japan! Japan has a lot of investment in Thailand. Large companies such as Toyota and Honda have set up factories in Thailand. Japan should not just watch and follow Thailand.

Economic collapse.”

Li Weidong shook his head: "My point of view is exactly the opposite. I think that in the face of Thailand's debt crisis, Japan will not only not help, but will also add insult to injury and drain funds from Thailand!"

Once it loses Japan’s financial support, it is inevitable that Thailand will fall into an economic crisis. With tens of billions of dollars in debt, Thailand’s economy will really be set back ten years!”

Li Weidong organized his thoughts and then said: "The main reason why I made this judgment is that Japan's own financial system also has problems. In particular, Japan's banks are in crisis.

The crisis in the Japanese banking system can be traced back to Japan's real estate bubble. When the Japanese real estate bubble burst, it caused a huge non-performing loan problem in the Japanese banking system, and many of the loans eventually became bad debts.

But in recent years, the yen has been appreciating, and the Japanese banking industry has made huge profits relying on overseas loans, thus covering up the problem of non-performing loans caused by real estate.

The main market for the overseas loans of Japanese banks is Southeast Asia, and most of them are short-term debts. When the financial markets in Southeast Asia encounter problems, Japan will no longer be able to continue to make profits from overseas.

If overseas loans cannot be profitable, Japan will inevitably withdraw funds from overseas to ensure that the country's capital ratio is sufficient. Otherwise, Japanese banks will go bankrupt due to bad debts caused by the real estate bubble.

Taking Thailand as an example, it already needs funds to tide over the difficulties. If Japan withdraws funds, it will be equivalent to a stab in Thailand's back, and Thailand will inevitably fall into an economic crisis."

Li Weidong's words once again caused a low-pitched discussion, but this time there was no rebuttal. Although what Li Weidong said was inference, it was all in line with the laws of economic operation.

Secretary Chen didn't have a deep understanding of economics. He looked at Situ Jian next to him, as if asking what Li Weidong said.

Situ Jian immediately replied in a low voice: "From an economic perspective, what Li Weidong said is possible."

Secretary Chen nodded with sudden realization. With Situ Jian's words, he knew how to report to the leader.

At this time, Professor Huang Liwei said: "Chairman Li, according to your inference, Japan will also be seriously affected?"

Li Weidong nodded: "Not only Japan, but the economy of the entire Asia-Pacific region will be severely affected by this. Because Japan's overseas investments are not just in Thailand.

Malaysia, Indonesia, and the Philippines in Southeast Asia, as well as South Korea in Northeast Asia, all have Japanese investments, and they all face the risk of funds being withdrawn by Japan.

Although these countries have not completely opened up their financial fields like Thailand, their financial systems are more or less similar to Thailand. Such as fixed exchange rates, high interest rates, or short-term foreign debt.

When Thailand's financial collapse occurs, it is likely to cause a chain reaction, thereby affecting the financial systems of these countries. So now back to the third question raised by Secretary Chen just now.

When it comes to what impact Thailand will have on Asia and the world by abandoning its fixed exchange rate, my conclusion is that it will trigger an Asian financial crisis!"

…

The development of real estate has always relied on banks. Real estate companies borrow money from banks to buy land to build houses, and then sell the houses to repay the loans. This method, which is similar to a white wolf with empty hands, is not only used by Chinese real estate developers.

This is how real estate developers all over the world operate.

Under this operating mechanism, real estate companies are in a state of high debt. For real estate companies, what they are most worried about is not that the houses cannot be sold and that banks are unwilling to continue to issue loans.

So when the Japanese real estate bubble burst, the biggest losers were not real estate developers, real estate investors, or ordinary people, but banks.

For real estate developers, they originally borrowed money to develop real estate. If the real estate bubble bursts, they will go bankrupt in the worst case. The same is true for real estate investors. They all borrow money to speculate on real estate, and if it doesn't work, they will cut off the supply.

However, banks are the ones who actually pay, and all losses incurred in the real estate bubble will eventually be passed on to banks.

When Japan's real estate bubble burst, the non-performing loans generated were eventually borne by banks and gradually formed bad debts.

Given the scale of Japanese real estate at that time, no economy in the world could absorb the non-performing loans generated by the bursting of the bubble.

However, these bad loans did not immediately detonate Japan's economy.

The reason is that Japanese banks make profits by issuing loans overseas, offsetting the pressure of non-performing loans.

Since interest rates on the Japanese yen were low at that time and interest rates in emerging markets in Southeast Asia were relatively high, investors withdrew capital from Japan and invested it in Southeast Asia to engage in short-term arbitrage and obtain huge profits. In this process, Japanese banks also made profits.

The economy of Tokyo, Japan, has also been advancing rapidly and reached its peak in 1995, seemingly unaffected by the bursting of the real estate bubble.

The Japanese economy at that time was not driven by real estate.

The three pillars that drive economic growth are investment, consumption and exports.

The main contribution of real estate to the economy is investment. As a developed country, Japan completed domestic infrastructure construction in the 1960s and 1970s. Japan's economy has long been no longer driven by investment.

Japan's consumer station accounts for more than 60% of its GDP, with the rest relying on exports and government spending. The contribution of investment to Japan's economy is almost negligible, and sometimes it even hinders economic growth.

For developed countries like Japan, as long as there are no changes in consumption and exports, the economy can be stable.

Therefore, after the real estate bubble burst, the Japanese economy did not shrink and still maintained rapid growth for several years.

Some people may suggest that Japan's economic growth after the real estate bubble was entirely dependent on the appreciation of the yen.

But in statistics, the economic growth rate of a country must be calculated based on the national currency, and the factor of inflation must also be excluded.

For example, when the National Bureau of Statistics publishes economic data, it always provides data in RMB, and only when comparing data with foreign countries, will it be converted into US dollars.

Therefore, the appreciation of the yen does not affect the calculation of Japan's economic growth rate using the yen. From a statistical point of view, Japan's economic growth in those years was real.

Although Japan's economy is growing, there is no way to absorb the non-performing loans caused by the bursting of the real estate bubble. By 1995, the Japanese banking system had nearly 6 trillion yen of bad debts. According to the exchange rate at that time,

It's more than 700 billion US dollars.

The US$700 billion in 1995 was enough to cause a crisis in the Japanese banking system, but it was also in 1995 that a big event happened in Japan, and that was the Great Hanshin Earthquake.

After the earthquake, the yen began to depreciate, which stimulated Japan's exports. On the surface, Japan's economic situation was good, and funds began to flow back to Japan. As a result, Japan's banking industry breathed a sigh of relief.

The Great Hanshin Earthquake caused the depreciation of the yen and stimulated Japan's exports, causing the Japanese economy to reach its peak in 1995.

The economic community generally believes that the Japanese economy is developing in a good direction. The Japanese government is also very confident in raising the consumption tax from 3% to 5%.

Looking back from the perspective of future generations, Japan's operation is simply a mystery. Not only Japan, but also the countries hurt by the Asian financial crisis are constantly making mistakes.

However, this is the view of hindsight after all. According to the analysis of economists at the time, the Japanese economy was in a growth stage, and the emerging markets in Southeast Asia were also doing well. Who would believe it at this time that it had been missing for twenty years?

It was not until the outbreak of the Asian financial crisis that Japan's banking problems finally broke out. In November 1997, Japan's first bank bankruptcy occurred. The reason was bad debts caused by the bursting of the real estate bubble.

The bankruptcies of their counterparts also alerted other banks, who accelerated the recovery of funds from Southeast Asia. The Bank of Japan's withdrawal of loans created a sharp credit crunch in Southeast Asia, exacerbating the Asian financial crisis.

When Japan burst its real estate bubble, capital could not find investment channels in Japan, so it could only transfer to emerging markets, thus creating the economic growth of the so-called "Four Asian Tigers".

However, it was also the bad debts caused by the real estate bubble that caused Japan to withdraw overseas capital, causing the Asian financial crisis to get out of hand.

Therefore, the source of the Asian financial crisis is actually Japan. Financial giants like Soros were only a catalyst for the outbreak of the Asian financial crisis. The final blame must be placed on Japan.

…

Li Weidong put forward the conclusion that the Asian financial crisis is about to break out.

However, most of the economists present did not agree with Li Weidong's views.

Although Thailand's economy has grown rapidly in recent years, it is only an economy of 180 billion US dollars after all, and its economic proportion is not high in the Asian economy.

Just a mere adjustment of Thailand's monetary policy will trigger an Asian financial crisis. This is too much fuss!

Moreover, there are no irreplaceable industries in Thailand, and Thailand’s life and death will have no impact on the Asian commodity supply chain.

The next second, several people stood up, intending to ask Li Weidong questions or refute Li Weidong's views.

Those who were about to ask questions did not expect that there would be so many people who were of the same mind. They were all stunned, and then began to give way.

"Professor Liu, please speak first!"

"Academician Wu, I think you stood up first, so you should speak first!"

"My movements are a little slower than Professor Qian, Professor Qian should speak first!"

Li Weidong looked at several people. They were either professors or academicians, all of whom were well-known domestic economists.

In an instant, Li Weidong felt filled with pride.

"This is to argue with other scholars! I have become an economic Zhuge Liang!"

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