Who Will Be The Winner Of The New Round Of Exchange Rate Wars?

The RMB exchange rate continued to depreciate slightly. From the weekly chart, it has been declining for fifth weeks in a row. This trend has been rare in recent years.

As of December 8th closing, the offshore renminbi against the US dollar (CNY) fell 0.15%, to 6.4179, the lowest closing level in 2011.

Offshore renminbi also fell more than 100 points, or 0.19%, at 6.4861.

The global media has been surprised by the 2% devaluation of the renminbi in August 11th.

So.

How does the United States operate the most powerful weapon in the international strategy of exchange rate?

For example, in the 1997 Asian financial crisis, the United States let us depreciate, we did not listen to it, insisted on exchange rate stability, and helped Southeast Asian countries through the crisis.

2003 years later, with the development of China's economy and opening up to the outside world, the United States forced us to appreciate again.

The reason is that China exported large quantities of cheap goods to the United States and snatched the employment opportunities in the United States, resulting in a huge trade deficit in the United States.

The United States threatened to impose tariffs of 27.5% yuan on Chinese imports if the renminbi does not appreciate by 30% yuan to 40%.

Finally, the renminbi appreciated.

Therefore, we need to be clear that exchange rate is a tool in the US, which is in line with its own international strategy.

Since its compilation in March 1973, the US dollar index is a barometer of the US dollar exchange rate.

From the chart below, we can see that since the collapse of the Bretton Woods system in the 1971 years, the dollar has undergone two rounds of complete fluctuations. Now it is the third round and the US dollar index is rising.

Do not think that this is a simple line. Every cycle is bloody plundering.

Next, I will give you a detailed analysis of how the three exchange rate wars are handled.

The first step (from 1971 to 1979) was that the US dollar depreciated by 27%, commodity prices rose, and US dollar interest rates remained low.

In August 1971, when Nixon announced that the US dollar was decoupled from gold to the end of 1979, the US dollar index had depreciated by 27%.

Prices of commodities such as oil, precious metals and basic raw materials are soaring.

Taking oil as an example, crude oil in the 1970 year was $1.8 a barrel, which was $10 a barrel in 1974, $20 per barrel in 1979, and 30 US dollars per barrel in 1980.

During this period, Latin America's exports of raw materials dominated the economy. With Mexico as an example, Mexico's economy grew by an average annual rate of 6.5% in 1970s.

Meanwhile, US dollar interest rates remain low.

At the beginning of 1970, the US dollar interest rate was only 4%, reaching 11.2% in 1979.

Do not think that the interest rate of 11.2% is very high, the 1970 inflation rate in the United States is 13.5%, and the interest rate of US Treasury bonds is 11%, which means that even if we buy bonds, we will lose 2.5% every year.

Due to the low interest rate of the US dollar, the Latin American countries led by Mexico borrowed heavily into the US dollar, and Mexico's total debt grew by nearly 20 times in this period.

The second step (from 1979 to 1985) was a 54% rise in the US dollar, a sharp rise in interest rates, a fall in commodity prices and a return of the US dollar.

At the end of 1979, the US dollar index rose from 95 points to 146 points in 1985, an increase of 54%.

In the 1979 year of the year, Paul Volker continued to raise interest rates since he became chairman of the Federal Reserve. In June 1981, the federal benchmark interest rate rose to 21.5%.

A year later, in July 1982, the US inflation rate dropped from 13% to 4%.

Commodity prices fell and crude oil prices fell from $more than 30 a barrel to $10 a barrel in 1986.

At the same time, the massive return of US dollar is due to the rising share returns.

The Dow Jones index rose from 850 at the end of 1979 to 1500 at the end of 1985, reaching 2000 points in 1987.

The return of the US dollar and the fall in commodity prices have had a disastrous impact on Latin American countries.

The first crisis broke out in Mexico.

On the 12 day of August 1982, Mexico was unable to repay its public debt of 268.3 billion US dollars due to insufficient foreign exchange reserves, and announced that the exchange market would be closed indefinitely.

After Mexico, Brazil, Venezuela, Argentina, Peru, Chile and other countries also have difficulty in paying debts. They have announced the termination or postponed repayment of foreign debts. This is the Latin American debt crisis that shocked the world financial industry.

At the end of 1982, the balance of foreign debt in the Latin American region exceeded US $300 billion, of which Argentina accounted for us $93 billion.

In 1983, Argentina needed to export 54% and 40% of its goods and services to pay interest on external debt; Brazil needed 40%; Mexico needed 35%; Chile and Peru needed about 33% each.

Latin America has fallen into the famous "lost ten years".

The third step (from 1985 to 1999) is that the US dollar starts to depreciate again when it comes to privatization.

In October 1985, on the grounds of resolving the debt crisis in Latin America, US Treasury Secretary James Beck proposed the "Beck plan" at the fortieth annual meeting of IMF and World Bank in Seoul, South Korea.

The plan calls for Latin American countries to privatize state owned enterprises in energy, railway, aviation and communications industries, while privatizing natural resources and infrastructure and implementing thorough trade liberalization and financial liberalization.

In the 1990 year of the year, the United States government, IMF and the World Bank jointly implemented the measure with the additional conditions of loans, forcing the Latin American countries to carry out the neoliberal economic reform.

The large-scale privatization of Latin American countries has since begun.

In the 1988 year of the year, when Carlos Salinas was elected president of Mexico, he first set off a wave of privatization. The new government auctioned hotels, aviation, iron and steel, sugar and other state-owned enterprises.

From 1990 to 1999, the number of foreign-funded enterprises in 500 Latin American enterprises increased from 149 in 1990 to 230 in 1999.

Let's take Argentina as an example.

Before the 1989 years of reform, the government of Argentina was dominated by major telecommunications, oil and banking companies.

Ten years later, the Argentina government almost sold out state-owned enterprises in strategic industries, including oil and gas resources, telecommunications, electricity, utilities and nuclear power plants, and even ports, wharves, airports and railway stations.

Only a few enterprises, such as state banks, mint bureaux and television stations, are mastered by the state.

In the 1989 to 1999 years, 7 of the 10 largest enterprises in Argentina were controlled by pnational corporations. Among the 100 large enterprises in the country, there were only 7 enterprises with Arab capital.

In 2000, TNC controls Argentina's total exports of 90.4% and 63.3% of its total imports.

In 1999, 98.02% of Argentina's largest state-owned enterprise, the Bureau of petroleum and mineral resources, was sold to Spain's repulse oil company. The fuel supply of Argentina 90% was owned by 4 foreign companies.

During the privatization process, Latin America's social crisis has worsened.

For example, after the privatization of water infrastructure in many countries, water prices have risen for 20 consecutive years, and more than half of the residents can not afford daily water consumption.

Second round of exchange rate Wars (1986 - 2001) to combat capital importing countries

The first step (from 1986 to 1996) is that the US dollar depreciated by 27%, commodity prices stabilized and the US dollar interest rate stabilized at around 4%.

Since 1986, the US dollar has entered a depreciation cycle, and the US dollar index has dropped from 27% 120 in early 1986 to 88 at the end of 1996.

In June 30, 1984, Thailand announced the implementation of the "basket of currencies" exchange rate system, of which the US dollar share accounted for over 80%, the yen was 11% to 13%, and the other currencies were not more than 10%.

Obviously, the Thai baht is basically fixed against the US dollar, maintaining at 1 US dollar to 25 baht.

Due to the depreciation of the US dollar, the real effective exchange rate of the baht has been greatly reduced, which has increased Thailand's export competitiveness and promoted Thailand's economic development.

During this period, Thailand's GDP grew at a speed of over 8% per year, becoming the world's attention focused Asian miracle.

From 1986 to 1994, the export of Thailand's manufacturing industry increased by 30%. The proportion of manufacturing exports to total exports rose from 36% to 81%, and the proportion of manufacturing industry to GDP share increased from 22% to 29%.

At the same time, the real estate bubble began to appear. From 1993 to 1996, real estate prices in Thailand increased by nearly 400%.

Because during this period, the United States was harvesting the fruits of Latin America's victory and hitting the Soviet Union of energy exporting countries, so during this period, the prices of commodities did not rise substantially, and the international crude oil prices remained basically stable under 20 US dollars per barrel.

The second step (1996 to 1998) is that the US dollar appreciates 20%, commodity prices stabilize, and US dollar interest rates stay at around 3%.

Since 1996, the US dollar has entered the appreciation cycle.

The US dollar index rose from 86 points in January 1996 to 95 points in July 1997, or 10.5%.

The Thai baht exchange rate is also closely following the US dollar, and export competitiveness weakens.

In 1996, Thailand's export growth rate dropped from 24% to 3% in 1995.

The decline in exports led to the rapid expansion of the deficit in Thailand, with a trade deficit of US $16 billion 200 million, accounting for 9.1% of the gross national product and a warning line of over 8%.

At that time, the US Federal benchmark interest rate was 3%.

In order to make up for the large trade deficit and meet the demand of over investment in China, Thailand borrowed large amounts of foreign capital and poured into Thailand's real estate and stock market.

In 1996, Thailand borrowed $93 billion in foreign debt and doubled its value in 1992. Thailand's economy has shown signs of crisis.

In March 1997, Soros and other financial predators concluded that Thailand could not maintain the original exchange rate and launched the first round of the attack.

In July 2, 1997, Thailand renounced the fixed exchange rate system. In July, on the 11 day of the year, Philippines renounced the fixed exchange rate. In August 14th, Indonesia announced a floating exchange rate system.

A financial storm in Southeast Asia broke out.

Meanwhile, the US dollar continued to appreciate, reaching 104 points in August 1998, up 20% from January 1996.

The financial crisis broke out in Southeast Asia in a more extensive scale. Philippines's pesos, Indonesian shields and Malaysia ringgit collapsed.

The third step (1998 - 2001) is to prescribe a privatization prescription to harvest the fruits of victory.

After the crisis, Southeast Asian countries turned to IMF for help.

The conditions for the opening of IMF are very simple. For loans, three conditions must be agreed: reducing government expenditure, tightening monetary policy and privatizing state-owned enterprises.

The last privatization of state-owned enterprises has privatized the lifeline industries of Southeast Asian countries, including finance, oil, electricity, minerals, telecommunications and so on. The state's economic control rights are in the hands of multinational corporations headed by American companies.

For example, in the 1998 years after the financial crisis, 12 major state-owned enterprises in Indonesia were privatized, including state-owned enterprises such as telecommunications, mining, cement and other pillar industries.

In the 20 months after the financial crisis, Western multinationals carried out 186 mergers and acquisitions in Southeast Asia. This is the largest asset pfer in Southeast Asia in 50 years, and the results of economic take-off in Southeast Asian countries are completely stolen by Western multinationals.

You may not know, actually Southeast Asia.

It could have been avoided.

In July 1997, the financial turmoil first started in Thailand. In August 7th, IMF held a meeting in Tokyo. The conference decided that every major Asian country government made 1 billion dollars, and finally made a loan of about 17000000000 dollars to the Thailand government.

If things end here, then IMF will do fairly well, but the problem is that these 170 billion dollars are conditional, and this condition is fatal.

The United States has asked Thailand to accept the central bank's off balance sheet liabilities if it accepts the loan.

The United States is so versatile that it will not know how much debt Thailand has. So Thailand has to announce its off balance sheet liabilities of 234 billion US dollars.

So all investors know that Thailand has no money, and even lending it to about 17000000000 is not enough.

What are you going to do if you are an investor? Of course, you should first raise your money and avoid greater losses, so the financial crisis in Thailand will inevitably happen and spread to other Southeast Asian countries.

At that time, Japan provided 54% of Thailand's overseas loans, 39% of Indonesia's overseas loans, and 36% of Malaysia's overseas loans.

The size of the loan determines that the Bank of Japan will not be able to retreat when it is in crisis.

So the last thing Japan wants to see is that the Japanese government must stop the outbreak of the financial crisis.

It proposed no conditions, direct assistance, and proposed the establishment of a $1000 billion guarantee fund for Asia.

100 billion dollars is enough to save Thailand, but the US Treasury and IMF are strongly opposed to the plan and use every means to obstruct the implementation of the proposal.

Japan finally had to give up because it could not resist the United States, and the last chance to save southeast Asia's financial crisis was extinguished by the United States.

In the final analysis, only the outbreak of crisis can promote the three fires of economic reform in Southeast Asia.

The third round of exchange rate war (2001 -), at the same time, crack down on energy exporting and capital importing countries.

The first step (from 2001 to 2014) was that the US dollar depreciated by 36%, commodity prices rose, and US dollar interest rates fell.

Since 2001, the Federal Reserve has cut interest rates for the 13 time in a row, setting the "strongest rate cut cycle" since 1981.

The US dollar index began to fall from the 110 point point at the end of 2001, and it fell to 70 points before the financial crisis in 2008. The decline of 36% is unprecedented, and the consequences are known.

The US dollar interest rate is negligible, basically around 0.3%, and then dropped to 0.25% after 2008 years.

In 2001, the size of the Federal Reserve's assets and liabilities was $610 billion, and in 2008 it was $2 trillion and 260 billion. After several rounds of quantitative easing, it reached 4.5 trillion dollars at the end of 2014.

This completes the steps to distribute the US dollar to the whole world.

This is followed by soaring energy prices, taking crude oil as an example, breaking $30 per barrel in early 2003, breaking 40 US dollars in September 2004 and 50 US dollars per barrel, in June 2005, 60 US dollars per barrel, 70 US dollars per barrel in August, 90 US dollars per barrel in 2007, and 147.27 US dollars per barrel in July 14, 2008.

Russia, India, Australia, Venezuela, Brazil, Chile, Peru, Columbia, Saudi Arabia and other ten major energy and commodity exporters are directly benefiting.

Because of the low price of the US dollar, emerging economies began to borrow large amounts of foreign debt to develop the economy.

According to IMF statistics, after the 2008 financial crisis, the scale of overseas debt issuance of non-financial enterprises in emerging markets surged sharply.

According to the International Finance Association, from 2014 to 2018, all emerging countries need to extend their business.

It will reach 1.68 trillion trillion dollars.

For example, the proportion of India's short-term external debt to total external debt rose from 23% in 2009 to 30% in 2013, exceeding the international warning line of 25%.

If the US dollar enters the appreciation channel, the cost of bond renewal in emerging economies will increase significantly, and the risk of debt will expand.

The second step (from 2014 to 2015) was a 20% rise in the US dollar and a fall in commodity prices.

Next, if interest rates are opened, the US dollar interest rate will enter a fast rising channel.

In October 2014, the United States stopped quantitative easing and entered the appreciation cycle.

From January 1, 2014 to August 2015, the US dollar index rose by 19.7% on the 31 day.

Coupled with the improvement of the US stock market, the total net capital outflow of the 19 largest emerging market economies reached US $940 billion 200 million, which is two times that of the 2008 - 2009 financial crisis.

Morgan Stanley uses the "trouble ten countries" to describe ten currencies that are facing the greatest risk: South African rand, Brazil, the Thai baht, Singapore dollar, new Taiwan dollar, Chile pesos, Columbia pesos, Russian roubles, won, Peru Saul.

At the same time, the commodity index fell by 43.7%.

The price of the global commodity market has reached a new low of 16 years, which will bring a serious blow to the "ten countries".

Brazil, Latin America's largest economy, is in the longest recession since the 30 decade of twentieth Century. In the year of 2014 years, Brazil has fallen by 35% against the dollar.

Venezuela, the largest oil exporter in Latin America, is in a vicious circle of inflation, with a shortage of basic supplies and a collapse of the economy.

Investors are almost sure that Venezuela will default on its US dollar debt.

Columbia was troubled by the decline in oil and coal prices. In the 12 months from 2014 to February, the Columbia Peso depreciated by 36% against the US dollar.

The third step is to harvest the fruits of victory.

The United States will not use the same strategy two times, but it is likely to buy large amounts of cheap assets in the crisis area. The US companies are ready to see when the Federal Reserve will launch.

The current Federal Reserve

There are 4 trillion and 500 billion dollars in debt, while the US stock market keeps rising. Cash in the hands of listed companies is very abundant. In 2014, the share repurchase and dividend payment amounted to more than 1 trillion trillion dollars.

According to Moodie's statistics, as of May 2015, the top 50 companies in the United States had 1 trillion dollars in cash and all listed companies held 1 trillion and 730 billion dollars in cash.

These 64% dollars are stored overseas, about 1.1 trillion dollars.

More importantly, with high share prices, it is easy to get more cash when it is necessary to buy.

As a result, the US companies have been grinding their teeth until the Fed's interest rate rises.

Under such circumstances, China faces two biggest risks:

First, China's domestic dollar capital reflow after the US dollar raises interest rates.

What's the impact on us after the withdrawal of large capital? It is worth considering carefully, and there are still a lot of underground banks out of control.

Second, whether it is the "raw material ten countries" that sell goods, or the "trouble ten countries" that love to borrow money (5 of which are duplicated), China has a lot of trade with them. Among the 15 countries, besides Columbia, Thailand and Saudi Arabia, the other 12 largest trading partners are China.

How to deal with the crises they face is a test of the wisdom of our leaders.

Let's take a look at the depreciation rate of major international currencies relative to the US dollar from the 2014 year to the present. We are the strongest, only depreciated by 5.5%, and there is still much room for depreciation.

It should be pointed out that we should not look at the exchange rate from simple import and export data, because exchange rate has never been determined by simple economic data, and it is the most direct politics.