The Rebirth of the Financial Hegemon

In the office of the president of Jushi Capital, there are a lot of materials on the table.

After reading these materials, Zhao Jiangchuan started writing and drawing with paper and pen.

He sometimes frowned, sometimes dazed, and occasionally sighed.

After the end of World War II in the 1950s, the trend of capital globalization was unstoppable.

When developed countries have severe excess productivity and primitive accumulation of capital reaches a certain level, without reasonable and legal international trade methods to expand international markets and integrate production raw materials, war is inevitable.

Therefore, participating in international trade through exporting agricultural products and low-end industrial products became an important reason for the rise of Southeast Asian economies in the 1970s.

In the 1990s, when the Western economy was in recession, Southeast Asian countries relied on their advantages in raw material exports to achieve the "Asian Economic Miracle".

For example, Thailand, Malaysia, Indonesia, and the Philippines are known as one of the "Four Asian Tigers".

Taking Thailand as an example, its average annual GDP growth was 8%. In 1995, its per capita income exceeded US$2,500, and it was classified as a middle-income country by the World Bank.

At that time, after Japan's economic strategy was adjusted from foreign trade to foreign investment, Japanese companies used Japanese yen to buy around the world.

Construction of factories, mergers and acquisitions, and rapid expansion.

Japanese companies, especially car companies, have focused their investment and production bases in Thailand, driving Thailand's economic development to flourish.

The rapidly developing economy has made the Thai government feel elated.

However, behind Thailand's high economic growth, in addition to tourism, is a single export model of low value-added agricultural products and labor-intensive industrial products.

It does not have irreplaceable high-tech content, nor does it have high value-added agricultural terminals.

In other words, the economic strength of Southeast Asian countries is actually driven by external funds.

The inflow of international capital is invested in real estate, stock markets and other speculative projects in Southeast Asian countries.

But in terms of science and technology and production technology, these countries have not upgraded.

The quality of the labor force has not improved and productivity remains low.

However, economic growth has pushed up wages. As labor costs rise, the export advantage gradually declines.

However, in fact, Thailand's economic growth is not based on the growth of unit input output, but mainly relies on the increase in external input.

In order to determine the prices of imported and exported products, calculate and control international trade costs, and reduce risks caused by exchange rate fluctuations.

The Thai government pegs its currency, the baht, to the U.S. dollar and implements a fixed exchange rate system.

under a fixed exchange rate system.

The exchange rate is relatively stable, and the fluctuation range of the exchange rate is either maintained spontaneously or artificially.

This enables the price determination of import and export products, the calculation and control of international trade costs, and the settlement of international claims and debts to be carried out relatively stably.

Reduces the risk caused by exchange rate fluctuations.

In addition, the relatively stable exchange rate has also curbed foreign exchange speculation to a certain extent.

Therefore, in theory, Thailand's implementation of a fixed exchange rate system at that time played a certain role in promoting economic development.

However, the fixed exchange rate is the exchange rate system prevailing under the gold standard system and the Bretton Woods system.

This system stipulates that a fixed ratio be maintained between the domestic currency and the currencies of other countries. Exchange rate fluctuations can only be limited within a certain range, and official intervention is required to ensure the stability of the exchange rate.

A fixed exchange rate is an exchange rate that is basically fixed and the fluctuation range of the exchange rate is limited to a specified range.

Under the gold standard, the gold delivery point was the limit for exchange rate fluctuations.

After World War II, a fixed exchange rate system centered on the US dollar was established. The International Monetary Fund stipulated that the currency parity of member countries should be expressed in a certain amount of gold or US dollars.

The currency exchange rates of member countries can only fluctuate within a certain range within a certain range of the gold parity ratio, with upper and lower limits of 1% each.

When the exchange rate of a country's currency against the U.S. dollar fluctuates beyond this range, the country's officials are obliged to limit exchange rate fluctuations within the prescribed upper and lower limits.

However, the Thai government is overconfident in its economy and completely fails to understand that its economic development is all driven by external capital.

The lack of flexibility in the exchange rate system has also resulted in a large amount of foreign debt without considering exchange rate risks.

All these paved the way for the subsequent financial crisis.

Irreversible foreshadowing.

Fixed exchange rate This is an overestimation of the real value of the Thai Baht.

Currency under the credit standard does not have any value in itself.

Its purchasing power is completely reflected in multiple comprehensive aspects such as technology, military, economy and domestic trade.

In the short term, the Thai baht will maintain a steady appreciation due to the popularity of the stock market and real estate market, and there is room for speculation and arbitrage. However, in the long run, it will not be recognized by the international market.

Not only that, Thailand at that time also borrowed a large amount of foreign debt to make up for its capital gap.

And make full use of the favorable international economic conditions of low oil prices, interest rates and exchange rates to invest overseas in countries and regions such as Japan, Taiwan, and South Korea.

Along with the rapid economic growth, Thailand's bank credit has increased at a faster rate, and short-term foreign debt has reached unprecedented levels.

With rising wages and rising prices, Thailand's economic level seems to be only one step away from developed countries.

However, the Thai government did not notice that a considerable part of the speculative capital flowed to real estate and the stock market.

When asset prices inflated due to the push of capital, taking the capitals of Thailand and Malaysia as examples, house prices soared more than ten times.

All of this contributed to the outbreak of the financial crisis.

The bomb has already been planted.

Even without the impetus of Jones Fund, Tiger Fund, and Quantum Fund behind it.

The Southeast Asian financial crisis will still break out.

Studying every major event in financial history is a required course for a financial practitioner.

Only by finding experiences and lessons from history can we make attack and defense measures against various things.

Zhao Jiangchuan remembered it very clearly.

The financial crisis that swept across Southeast Asia first broke out in Thailand.

From March to June 1997, 66 financial companies in Thailand secretly received large amounts of liquidity support from the Bank of Thailand.

In addition, there has been a large amount of capital fleeing Thailand.

The Bank of Thailand, which finally sensed the risk, responded to the attack by international capital by raising interest rates.

At its highest point, Thailand's short-term interest rates soared by 1,000 percent overnight.

That time, the international short sellers were killed and abandoned their armor.

But when there are problems with the fundamentals of the economy, short-term interest rate adjustments no longer have decisive significance.

After defeating the initial attempt by international capital short sellers, deeper hidden dangers were laid.

The exchange rate has been preserved, but the real estate and stock market cannot be preserved.

The sharp rise in interest rates has put pressure on Thailand's real economy.

Because interest rates rise, it means that financing costs rise.

Some speculative capital had to be withdrawn from real estate and the stock market.

But under the gaze of a pack of wolves, Thailand could not escape the fate of being sniped.

Thailand ultimately failed after the central bank used all its foreign exchange reserves to maintain the peg.

Stock market, bond market, foreign exchange market, property market.

Total collapse.

Nothing was saved.

All of this, including the detonated economic crisis in Southeast Asia, is no less than a nuclear bomb in the hands of Zhao Jiangchuan.

As long as he buries it in advance, all he has to do is wait for it to explode.

With this guy's ambition, he has absolutely no interest in following international capital behind his back.

Zhao Jiangchuan wants to defeat Southeast Asia in one fell swoop.

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