Chapter 511 Nonsense prediction

The next day, Li Weidong came to the meeting place and saw that Situ Jian had already come to the conference room.

Li Weidong rushed forward to say hello, and after a few words of greetings, he asked, Mr. Situ, you said on the phone that international financial speculators have come, what's going on?

Situ Jian immediately explained: Didn't you say before that once Thailand gave up its fixed exchange rate, the baht would be attacked by international financial speculators?

Although Thailand has not given up its fixed exchange rate, you have predicted that international financial speculators attacked the Thai baht. In mid-May this year, the Thai baht was attacked again on a large scale.

International financial speculators obtain funds by borrowing Japanese yen and then depositing Thai baht for 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%.

The Bank of Thailand directly invested tens of billions of US dollars and sought assistance from the Monetary Authority of Singapore and the Hong Kong Island Monetary Authority, which finally repelled international financial speculators and stabilized the exchange rate of the Thai baht.

However, after calculating over time, international financial speculators probably only used 300 million US dollars to leverage Thailand's foreign exchange reserves of tens of billions of dollars. If the other party uses more funds, Thailand will lose this battle.

The details of this incident were only announced at a summit of central banks in Asia in late May. At that summit, the Bank of Thailand hoped that countries could help Thailand and fight against international financial speculators together.

To put it bluntly, I want to borrow money from various countries and borrow US dollars to maintain the exchange rate of the Thai baht. However, central banks are not fools. Who is willing to use their own money to fill the hole for Thailand! The final summit also came to an end.

According to the information released by the Thai side, the international financial speculators who attacked the Thai baht this time mainly came from Wall Street, including investment banks such as ****, Citigroup, Goldman Sachs, and hedge funds such as Quantum Fund and Tiger Fund.

You should know about investment banks like Citi and Goldman Sachs. You may not be familiar with Quantum Fund and Tiger Fund. They are all internationally renowned hedge funds. They are like vultures on Wall Street, taking the financial markets of the world as their own. It's its own prey!

I have also heard about these two hedge funds. The Quantum Fund was established by George Soros. When the two Germanys were reunified, this guy made a billion dollars by shorting the British pound and became famous.

Li Weidong paused, then said: Tiger Fund was established by Julian Robertson. He is a godfather in the hedge fund industry. Tiger Radical has always been investing in 'value investing', investing in the stocks of listed companies. .

However, this time, the profit brought by attacking the Thai baht is obviously large enough that even the godfather of the hedge fund could not resist the temptation and started arbitrage foreign exchange transactions.

I didn't expect you to do research on foreign hedge funds! Situjian lowered his voice,

He asked with a serious face: Tell me honestly, have you also participated in the investment of foreign hedge funds?

Li Weidong hurriedly shook his head: I'm in the industry, and I don't touch anything 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. Situjian said.

Li Weidong continued to ask: Mr. Situ, you were attacked again by 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 time the Thai baht has been attacked this year. The first time was in February, and the earlier it was in July last year. Borrow in yen to get funds, then deposit in baht to earn overnight interest.”

Who made 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 in Japanese yen. Attacking the Thai baht with yen is easier than attacking the Thai baht with dollars. Li Weidong said.

Situjian sighed lightly: Yeah, if Thailand wants to stabilize the exchange rate of the baht, it can only keep filling the hole with US dollars. But now Thailand's foreign exchange reserves are about to run out. At the end of last year, , Thailand still has a foreign exchange reserve of more than 37 billion US dollars. After the last two attacks, their current foreign exchange reserve is probably less than 7 billion US 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 Japanese yen and depositing Thai baht to carry out arbitrage. Forex trading.

The second is what you said before, abandoning the fixed exchange rate and switching to a floating exchange rate. Once the Thai baht depreciates, you can get rid of the 14% interest spread, and arbitrage foreign exchange transactions will naturally be unprofitable.

And our symposium this time is to discuss these two possibilities, and at the same time, we also need to discuss what negative effects these two possibilities will bring to our financial system.

No matter what kind of response Thailand adopts, the negative impact on our national financial system should not be large, right? Li Weidong frowned slightly and continued;

Our country's finance is not in line with the world. In terms of foreign exchange, the country has controls, and the exchange rate can also be intervened by means of control. Simply put, people eat steak, and we eat cabbage. Whether steak is delicious or not has something to do with cabbage. What's the matter!

Xiao Li, when I said 'we', I didn't mean what you understood. Don't forget, it will be July 1st soon. After July 1st, we will take back Hong Kong Island. Finance is also related to us!

Situ Jian smiled slightly and continued, The financial system of Hong Kong Island is completely open, and Hong Kong Island is also the financial center of Asia. If the Thai baht is attacked, it will inevitably affect Asia's finance, and naturally Hong Kong Island will also be affected.

Li Weidong thought about it carefully and said, Hong Kong Island is also a fixed exchange rate. The Hong Kong dollar has always been stable at around 8.3 to 1. Are the leaders above worried that things in Thailand will also fall on Hong Kong Island?

You guessed it right, the leaders have this concern. Hong Kong Island has just returned, and stability is most needed. Situ Jian nodded.

The leader really is far-sighted! Li Weidong said.

Situ Jian said, Okay, now that you know the content of this meeting, prepare to prepare. We will have a meeting when everyone is ready!

...

After a while, the participants were basically all there. They are basically experts in the domestic economic field, and the professor of Huang Liwei from the Central University of Finance and Economics that Li Weidong knew before also came.

These economic experts, some Li Weidong knew, some Li Weidong did not know, Situ Jian introduced them one by one.

In addition, there were some observers sitting around, and these people were probably irrelevant, so they did not introduce them.

At the beginning of the meeting, the first discussion was whether Thailand would adopt foreign exchange controls or floating interest rates in response to the attacks of international financial speculators.

Many economists believe that Thailand will resort to foreign exchange control measures, 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 should save others by themselves, and they instinctively feel that foreign exchange control is a very normal thing.

Moreover, at that time, China's economy was not in line with the international economy, and domestic economists had limited information. Few people could go abroad to understand the economic situation abroad.

After discussing for a long time, Situjian finally asked Li Weidong: Chairman Li, you predicted a few years ago that international financial speculators would attack the Thai baht, and that Thailand would abandon the fixed exchange rate system. Now your prediction is correct. Half of it has been fulfilled, and the other half, you have to talk about the basis for judgment, right?

Li Weidong stood up and said, Every teacher is an expert in the economic field. My level is limited in this area, and among you, I'm more of a classmate. If something is wrong, the right should be a shame!

After the modesty, Li Weidong continued: I think Thailand will give up the fixed exchange rate mainly because Thailand believes in Western economic liberalism.

Chairman Li, this is not your judgment on the economic level! Someone next to him said.

Mr. Liu, I know, you are saying that my judgment is not based on scientific basis, but only based on subjective will. Li Weidong smiled slightly and continued;

For so many years, the West has been promoting their economic liberalism, and capital controls are not in line with the values ​​of the Western world. If you talk to a Western economist about capital controls, he will 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 you want to implement currency control in Thailand, it seems unbelievable to Thai people.

I also admit that Thailand believes in economic liberalism without any economic basis. This is not a scientific judgment.

But the reality is that, the economies of Western countries are more developed, and they hold the right to speak in finance. The economic form they promote is also easier to gain the trust of countries around the world.

Liberal economism is an economic theory and policy system that opposes the state's daring to economy and advocates free competition.

In the eyes of liberal economists, the best economic policy for a country is to not interfere in the economy in any way, and to implement free economy, free competition and free trade, and the role of the state is limited to safeguarding national security.

In the nineteenth century, this theory was very popular.

Western countries take advantage of free trade to dump goods around the world. After all, the productive forces of Western countries were in an advantageous position at that time, and under the system of free competition and free trade, they had an absolute advantage.

During the two world wars, Keynesian state interventionism arose.

During the Great Depression in the 1920s and 1930s, Roosevelt used state intervention to quickly recover the American economy. This successful case made Keynesianism replace liberal economism and became the mainstream at that time.

After the end of World War II, the world economy began to recover, and liberal economism once again made a complete comeback.

At this time, the productive forces of the West are still in an advantageous position. They need to dump products to the world, and naturally they have to start selling liberal economics around the world.

Since the 1980s, the political situation in the entire Southeast Asian region has been relatively stable, the economy has achieved remarkable development, and the savings rate of ordinary people in Southeast Asia is also relatively high.

Since ordinary people in Southeast Asia have money in their hands, it is of course a good place to dump goods, so Western countries began to frantically promote liberal economics in Southeast Asia.

Thailand was the first to be fooled and lame. Thailand first opened up the economic sector, and then opened up the financial sector. 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 take deposits and borrow directly from abroad, and allowed the free use of these foreign currencies within Thailand.

Also in the 1990s, Thailand allowed foreigners to freely borrow, lend and exchange currencies within Thailand.

In addition, Thailand has also opened its domestic stock market and bond market to the outside world, and does not impose any restrictions on foreign direct investment.

It’s just not restrictive. Thailand also took the initiative to give the green light. They asked financial institutions not to implement foreign debt scale control, relax supervision, and allow enterprises to borrow foreign debt freely.

Thailand's foreign exchange market has also opened 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, each one is killing, 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. Thailand is tantamount to stripping its financial industry and giving it to financial speculators.

In the future, a country's financial sector will be open as long as it is said to be open. Foreign capital wants to enter these areas of a country and has to exchange things for it. Things like trade, tariffs, investment, technology, etc., are all bargaining chips.

For example, if you want to get free loans in my country, do you want to import more of my goods, lower my tariffs, invest in my country, or give me some technology.

To be open, it has to be open to each other. There is no mutual benefit, who will talk to you about openness!

How can there be such a fool as Thailand, a free economy has been fooled and fully opened.

After being brainwashed by Western countries for so many years, the concept of free economy has penetrated into the bone marrow of Thailand. For Thais, things like foreign exchange control are completely unconsidered options.

Excessive belief in liberal economicism also made Thailand the trigger for the Asian financial crisis.

The so-called flies do not bite the seamless egg, this egg in Thailand has seams, and it is inevitable to attract flies. Whenever there is a slight disturbance in the world economy, Thailand will surely suffer.

In addition to the Asian financial crisis in 1997, the subprime mortgage crisis in 2008, the Thai economy suffered; the oil price volatility in 2014, the Thai economy suffered; the global epidemic in 2020, the Thai economy suffered again.

In the future, the energy transition brought about by carbon neutrality in the world will definitely suffer the Thai economy.

...

After listening to Li Weidong's remarks, several economists in the conference room frowned. They seemed to disagree with Li Weidong's point of view, but they were not easy to refute.

It is indeed a fact that Western countries hold the right to speak in the world economy. It is also true that Western countries are advocating liberal economism.

The behavior of Thailand in the past ten years is indeed a life-threatening practice of liberal economicism.

At this time, Professor Huang Liwei asked: Chairman Li, when do you think Thailand will abandon the fixed exchange rate?

Academician Situ told me just now that Thailand's foreign exchange reserves can no longer hold. 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 give up the fixed exchange rate in early July. exchange rate.

Li Weidong didn't wait for everyone to ask any more questions, and then said: The reason why I made this judgment is that there is another reason besides Thailand's low foreign exchange reserves.

July is the beginning of the second half of the year and also the beginning of the third quarter. In July, financial institutions have completed the settlement of the first half of the year. At this time, the introduction of new monetary policies will have less 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 performing the settlement of the previous quarter, and on the 4th, it will face the weekend. So I think July 2 and 3 would be a reasonable time to change monetary policy.

Even the date has been figured out! Huang Liwei's professor smiled slightly, and then said, It's only a few days before July. Let's take a look and see if what you said is accurate.

The other economists also shook their heads with a smile, and some even showed a dismissive expression, but they didn't raise a bar against Li Weidong out of face.

It is normal to predict that Thailand will abandon the fixed exchange rate, and many people on the scene have such predictions.

It can be predicted to a certain date, which is a bit nonsense!