The Rebirth of the Financial Hegemon

Dry!

This was the final conclusion reached after Soros and Stanley Druckenmiller met the next day.

There are three reasons.

First, the hegemony of the US dollar, which is the world's reserve currency.

More than 90% of the world's international trade is settled in U.S. dollars.

Since the beginning of the year, the US dollar exchange rate has continued to strengthen in the international market, and the Thai baht's fixed exchange rate means that it has continued to appreciate passively.

This is very detrimental to Thailand's economy.

In the Asian market, Japan is the main competitor in Southeast Asia due to its high degree of development.

Whether in agriculture or industry, Japan has extraordinary competitiveness in Asia and even the world.

But as the dollar strengthens, the yen has fallen.

The currencies of Asian countries were already too high compared to the yen, but now the yen is falling due to the strength of the U.S. dollar. This has caused exports of countries pegged to the U.S. dollar to decline, exacerbating the current account deficit.

Statistics collected by the Quantum Fund team show.

From 1995 to 1996.

The overall export growth rate of countries such as Thailand, Malaysia, Indonesia, and the Philippines dropped from 22.8% to 5.6%, a decline of nearly 70%.

Affected by the sharp decline in exports, the GDP growth rate of East and Southeast Asia dropped by nearly one percentage point.

Second point

The exchange rates of Southeast Asian countries are mainly determined by the US dollar as the leading currency.

However, its monetary system pegged to the U.S. dollar results in smaller free fluctuations and a lack of flexibility in the exchange rate system.

This is especially the case in Thailand.

Judging from the actual fluctuations of the Thai baht exchange rate in 1993 and 1994, its monthly change rate was only 0.15% to 0.16%.

Although this inflexible peg system can encourage direct investment to a certain extent, it severely limits the Bank of Thailand's operating space to use monetary policy to regulate the economy.

Since 1988, capital has begun to flow into Thailand in large quantities, putting the Thai baht under greater appreciation pressure.

The Bank of Thailand had to limit the appreciation of the baht and implement neutralization intervention before the end of 1993.

As a result of the intervention, the gap between domestic interest rates and international interest rates continued to expand, further attracting capital inflows.

After the Bank of Thailand gave up its neutralization intervention, the massive inflow of capital promoted the expansion of domestic money supply.

This has further stimulated Thailand's domestic demand and investment in non-important sectors, making it difficult for the Bank of Thailand to implement effective monetary policy.

Although the currencies of other Southeast Asian countries are allowed to fluctuate significantly, their governments have strongly intervened in the foreign exchange market and exchange rates.

In an attempt to maintain a certain level of psychological price in the long term, its exchange rate policy is also inflexible.

This mentality is somewhat similar to the mentality of living in a small household.

It's like a farmer raising a pig.

The price of pigs was five yuan per catty one year, and it would cost at least five yuan per catty the next year no matter what.

If the price of pigs falls, the psychological hurdle will be difficult to overcome.

To put it simply, it is wishful thinking to maintain the price of one's own currency at the desired price regardless of market changes.

The third point

When Southeast Asian countries relaxed capital account controls, they did not carry out corresponding reforms in their exchange rate systems.

Economically, it is believed that free capital transactions cannot coexist with artificially fixed exchange rates for a long time.

This rule cannot be broken.

Because exchange controls are implemented to maintain an exchange rate that is seen as overvalued in the market.

Southeast Asian countries implement capital liberalization without a strong international balance of payments and a flexible and effective exchange rate system, which prevents automatic adjustment of exchange rates.

In this situation where capital is allowed to flow in and out freely, Quantum Fund's intelligence agency believes that speculators can speculate in the market as long as they take small risks.

Quantum Fund’s intelligence system also found that Southeast Asian countries, especially Thailand, lacked effective supervision of the financial sector.

Thailand opened its capital account prematurely, but the central bank failed to regulate foreign banks' offshore operations and financial transactions.

Due to the high degree of openness of Thailand's capital account, non-residents can more freely participate in trading activities in the local market, but the central bank's supervision work is not timely.

On the basis of these three irreversible points, the collapse of the Southeast Asian economic system is a foregone conclusion.

It is a foregone conclusion.

It's like a building with a hollow in its foundation. It's only a matter of time before it collapses.

No one can change the fate of these emerging market countries.

If it collapses early, it may end early. The longer it is delayed, the more serious the disaster will be.

After confirming this result, Soros said to himself.

“What we’re doing is not wrong, specifically, it’s not exacerbating the wealth gap in this country.

On the contrary, we are helping this country move on the right path instead of going further and further down the wrong path..."

A week passed in a flash.

This week, Stanley Druckenmiller has focused all his attention on Southeast Asia.

Soros has been waiting quietly, waiting for the opportunity to appear.

This opportunity is the ASEAN political landscape.

For this problem, Soros had considered many options nearly a month ago.

Now Soros has formulated an action plan, which is basically the same as the last pound incident, that is, to use political factors to attack!

After studying with Stanley Druckenmiller, Soros sat heavily in the sofa chair and stretched after a long stretch.

He shouted to Druckenmiller: "Let the whole world turn their attention to Southeast Asia!"

A silent battle has begun, and the ghost that roams the world hangs over the countries in Southeast Asia.

….

In North America in November, heavy snow covers the ground.

The entire city of Manhattan is often covered in white.

The snowflakes reflecting the crystal light made Zhao Jiangchuan feel lost.

The arrival of winter means that the year is coming to an end.

In a few months, it will be China’s annual Spring Festival.

Set off firecrackers, eat dumplings, and visit relatives.

You can also get lucky money.

the most important is.

There, there were parents who gave birth to him and raised him.

There, no matter how tired you are, you will find a safe haven.

Zhao Jiangchuan felt a little homesick.

"We currently hold 180 billion Thai baht assets in the Thai market. From a risk perspective, I think we should establish a certain position size in the interest rate market to deal with the risk of possible depreciation of the Thai baht..."

“There are currently growing calls for the depreciation of the Thai baht. Judging from the current situation in Thailand, it is already a matter of time before the Thai baht depreciates, so I also agree with the establishment of a short position in the Thai baht…”

"Last month, international capital made several tentative attacks on the Thai baht. Judging from the response of the Bank of Thailand, the Bank of Thailand's psychological price for the Thai baht is between 24 and 25..."

"Judging from the data we have collected, BOT is the only buyer of the baht when international capital tests the baht..."

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