classifiedscript Chapter 116 Entering the Vision of Important Figures
Chapter 116 Entering the Vision of Important Figures
Chapter 116 Entering the Vision of Important Figures
In the 1970s and 80s, after more than 30 years of rapid development since the end of World War II, Japan’s economic strength achieved a qualitative leap, becoming the world’s second largest economy.
At its peak, Japan's GDP reached the combined GDP of all other Asian countries, and its financial assets were more than twice the combined financial assets of all other Asian countries.
This period can be considered the most glorious stage of Japan's economy. It has always wanted to establish itself as the leader in Asia and aspire to become the true leader of Asia.
Therefore, Japan wanted to emulate the United States and form its own East Asian flying geese formation.
Simply put, Japan is the leader, ranking first and mainly responsible for cutting-edge industries with high technology content and high profit margins.
Once Japan completes its industrial upgrading and domestic workers' wages rise, Japanese companies will transfer the outdated production capacity they have eliminated to the Four Asian Tigers.
The Four Asian Tigers relied on cheap labor and land to take over low-end manufacturing industries transferred from Japan. Once the Four Asian Tigers achieved their growth, they transferred these industries to the next level of countries, allowing them to acquire the higher-end industries that Japan had phased out.
Layer by layer, Japan has continuously expanded into other Asian markets by exporting technology, equipment, and capital, thereby gradually influencing the economic development trajectories of these countries.
Relying on this model, the Japanese economy achieved rapid growth, and by the mid-to-late 1980s, its economic strength had even expanded to the point that it once boasted of buying up the entire United States.
However, do American policymakers really want to see Japan grow and expand so rapidly?
The answer is obviously no.
What's puzzling is that instead of reprimanding their son, they even encouraged and praised him extensively.
The answer is simple: from beginning to end, this was a huge pit dug by American capitalists.
Because the United States understands very well that it holds the remote control for all these events in its own hands.
In 1985, the first opportunity to harvest began.
After the Plaza Accord was signed, the yen began to appreciate significantly, while the dollar began to depreciate.
The direct consequence of the yen's appreciation was that the economies of the countries that followed Japan began to take off.
Taking Thailand as an example, the Thai Railways maintains a fixed exchange rate with the US dollar, which has long been at a level of 25 to 1.
The depreciation of the US dollar is equivalent to the continuous depreciation of the Thai Railway, which greatly enhances the export competitiveness of Thai goods.
On the other hand, the strengthening of the yen has also caused Japanese manufacturing to lose its price advantage. In order to compete with European and American products, the Japanese government has begun to increase its encouragement for Japanese companies to go global and invest in Southeast Asian markets where costs are lower.
During the period of yen appreciation, Southeast Asian countries benefited from two waves of growth.
First, exports were booming, resulting in a large trade surplus.
Secondly, the influx of Japanese capital has resulted in a large accumulation of capital surplus.
During this period, the economies of Southeast Asian countries grew by an average of more than 5% annually, attracting worldwide attention.
However, the economic prosperity of Southeast Asia is ultimately due to the strengthening of the yen.
As the dollar reaped the yen, the bubble burst, the first harvest was completed, and the second harvest followed.
In 1992, Richard Leighton took office, and American internet companies began to develop rapidly. In addition, they benefited from the collapse of the Soviet Union. By 1994, the Federal Reserve had to raise interest rates to combat the overheated domestic economy.
In contrast, Japan's economy slumped after the bursting of its bubble economy, and the yen has been continuously lowering interest rates in an effort to quickly revive the economy.
This has resulted in a situation where the US dollar is strengthening and the Japanese yen is weakening.
Southeast Asia's economic boom was mainly due to the previous environment of a weak US dollar and a strong Japanese yen.
Now the situation has reversed, with the US dollar strengthening and the yen weakening, and these Southeast Asian countries that follow Japan have naturally been severely affected.
The appreciation of the US dollar caused the value of Thai railways to also appreciate, directly leading to a sharp decline in Thailand's export trade.
Worse still, the establishment of the European Union and North American Free Trade Area further squeezed the export markets of Southeast Asian countries, leading to a precipitous drop in their exports.
Furthermore, the successful reform of the exchange rate system in China, which significantly reduced the exchange rate to 8.7 RMB to one US dollar, greatly stimulated exports and had a strong impact on the export trade of Southeast Asian countries.
However, the most devastating blow came from within Japan itself.
As the Japanese economy declines, a large number of Japanese companies and funds are withdrawing from Southeast Asia.
As Japan is the largest source of capital in Southeast Asia, the withdrawal of Japanese capital has led to a massive capital outflow across the region.
The predicament of a sharp decline in trade volume.
For a country's exchange rate to be stable, it must ensure a balance of payments, meaning that inflows of funds are approximately equal to outflows of funds.
There are three ways for funds to enter and leave a country: foreign trade, foreign direct investment, and financial investment, also known as hot money.
Take Thailand as an example. Thailand is facing a trade deficit and a large outflow of overseas investment. To maintain a balance of payments, the Thai government has only one option left: to open up its domestic capital market and attract financial capital inflows.
Otherwise, if the Thai Railway collapses, Thailand's credibility will crumble.
With Hong Kong's return to China imminent, Southeast Asian countries are harboring a glimmer of hope that they can replace Hong Kong as Asia's financial center, or at least divert some of Hong Kong's financial business.
In order to seize financial opportunities, develop international financial centers, and at the same time alleviate the pressure of currency depreciation caused by the outflow of Japanese capital, Southeast Asian countries are competing to open up their financial markets and enthusiastically embracing international speculative capital.
Among these, Thailand's financial reforms are the most radical.
In 1992, Thailand liberalized its capital and financial account controls.
In 1993, it further developed offshore financial business and launched the Bangkok International Financial Arrangement (BIBF).
Under this framework, commercial banks that obtain a BIBF license can attract foreign currency deposits abroad and then issue loans in Thailand in the form of foreign currency.
In other words, the entire Thai business community can directly waive the Thai Railway, and businesses and banks can borrow US dollars and Japanese yen, with banks directly borrowing US dollars and Japanese yen from foreign investors.
The advantage is that you can directly use US dollars and Japanese yen to go abroad and expand internationally.
The downside is that the debt in US dollars and Japanese yen has increased rapidly, becoming a massive, unregulated crisis that has gone unnoticed.
By 1995, Thailand's capital and financial accounts were fully open, and the Thai government even allowed foreigners to open Thai Railways accounts in Thai banks for deposits or loans.
A large amount of hot money has flowed into Thailand and Southeast Asia. This money is not going to be properly invested in the real economy; instead, it has all poured into the real estate sector and the stock market.
In less than four years, property prices in Thailand have increased by about four times.
As the housing bubble grows larger, Thailand's financial system is also facing two serious problems.
First, the scale of foreign debt has reached an alarming level.
Thailand's external debt exceeds US$80 billion, while its foreign exchange reserves are only US$30 billion.
Second, there is a serious debt mismatch.
First, there is a maturity mismatch. The funds that international capital lends to Thai banks are short-term debt, but when invested domestically, they become long-term real estate loans. This is short-term debt invested in long-term projects.
The second issue is currency mismatch. Thai banks borrow US dollars and Japanese yen, but invest in Thai railways domestically. This means that property prices, banks, and fixed exchange rates are completely tied together.
If housing prices fall, bank bad debts will increase, and the financial system will collapse.
If the exchange rate cannot be maintained, the debt burden will increase significantly. What used to be 28 Thai Baht to repay 1 US dollar may now require 30 or even 40 Thai Baht, and the financial system will still collapse.
Housing prices must be protected, and so must the exchange rate; if either is not protected, the entire financial system will collapse.
If housing prices are to be protected, interest rates will be lowered, hot money will flow out, and if hot money flows out, the exchange rate will collapse.
If maintaining the exchange rate requires raising interest rates, who would still take out a loan to buy a house?
Therefore, protecting housing prices and protecting the exchange rate are fundamentally contradictory.
The Americans knew that the second wave of harvesting could begin.
"You established Ernst Capital Management Company just to get involved in Thai Railways' profits and get a piece of the pie, right?"
In February of this year, Soros launched his first probing attack on Thai Railways.
He borrowed $150 worth of Thai Railways from a Thai bank and sold it off heavily in the spot market.
However, the Thai government reacted quickly, using two billion US dollars of foreign exchange reserves to buy back Thai Railways shares and significantly raising the short-term interest rate of the Thai baht.
With the Bank of Thailand's two-pronged response, the first wave of Thai Railways' sell-off quickly subsided, and Soros suffered a defeat in his first battle.
However, everyone knows that Soros is just researching better countermeasures. At present, Thailand's financial industry and foreign exchange reserves are simply unable to withstand the impact of international speculative capital.
If the Thai Railway falls, the entire Southeast Asian market will become a paradise for sharks.
Financial institutions like Ernst are rife with those who intend to follow in Soros's footsteps and pick up scraps.
But now Massim has given Ernst another option, a real option to get involved.
What is that list?
What list?
Of course, this refers to the list of those who are truly involved in this wealth-sharing process.
During the Asian financial crisis, assets in various countries became dirt cheap, but have you heard of European funds coming in? Or capital from other countries participating?
Because America simply doesn't allow it.
Not to mention other funds, even domestic American capital, 99% of them would support getting a share of the profits.
The United States has long compiled a list of companies that can acquire these countries' rock-bottom assets.
Even if other companies offer higher prices, it won't matter. These countries dare to resist. Just wait and see if the International Monetary Fund and the World Bank will give you a mortgage.
Once Ernst Asset Management is included on this list, it signifies their true entry into the game.
They can profit from companies in Southeast Asian countries that make easy money, such as those in the financial, power, water conservancy, and port sectors, as well as from companies in Japan and South Korea.
Essentially, this is the American pyramid of powerful families and figures dividing up the wealth of Southeast Asia.
This is a sure-fire way to make money, a steady stream of income.
So Ernst was so shocked, but his expression quickly calmed down, and he gave a meaningful smile. "So, I've now entered the sights of important people?"
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