Chapter 30 Sweeping Southeast Asia
Freely floating currencies have certain flaws, because there will always be excessive deviations in the market. ”
Section 1 An unfortunate prophecy
About a year ago, Maurice Goltz, an economist at the International Monetary Fund, published an article in the British magazine The Economist. Prediction: Judging from the danger signals in the Mexican financial crisis in December 1994, in Southeast Asian countries, currencies are experiencing impacts from all directions, which may lead to a Mexican-style economic catastrophe. Then, he said frankly that Thailand's Mexico. There are more signs than other Asian countries. In other words, if a crisis such as financial turmoil occurs in Southeast Asia, Thailand will be the first to bear the brunt.
Goltz and the International Monetary Fund he represents are not in Southeast Asian countries. So popular, because the former are regarded by the rising stars of Asia as the spokesperson and decoration of Western developed countries. In the eyes of the leaders of these former colonial countries, believing in them is tantamount to betraying their own national interests. p>
This is a barrier woven by history. Human beings have lost the possibility of mutual trust and mutual assistance. Prejudice makes people narrow-minded and makes it difficult to face reality.
Ge. Mr. Erzdan has not received the attention of Southeast Asian countries, especially in Thailand. Both the government and the public are intoxicated by a blueprint for the future. How can they accept the prediction of an uncertain future?
In this way, Goltz was driven away. However, the disaster he first predicted came as expected.
On July 2, 1997, the Thai government and financial authorities were in a panic and announced that they would give up. The Thai baht, which had been pegged to the U.S. dollar for 13 years, implemented a floating exchange rate system. The Thai baht suddenly plummeted, and was in a tragic situation where no one dared to save it, and hit a black record of the lowest point in history. The currency crisis finally happened overnight. broke out. Immediately afterwards, the financial markets of the Philippines, Malaysia, Indonesia, Singapore and other countries also began to undergo violent turmoil. The Philippine peso, Malaysian ringgit, Indonesian rupiah, Singapore dollar, and even the economically closed Myanmar currency also People can't help but worry that Southeast Asian countries will repeat a financial crisis similar to the one planned by Soros.
Until now, Thais and even the entire Only the countries in Southeast Asia realized how accurate Mr. Goltzdan's prediction was. Of course, for Goltzdan himself, the crisis in Southeast Asia was just an unfortunate prediction.
Section 2: Bubble. Six Colors of Light
In 1997, the financial markets in Southeast Asia, which had always been calm, were in turmoil. Since May, the foreign exchange market has become violent and choppy. Currencies such as the Indonesian rupiah and the Singapore dollar have continued to depreciate sharply, and they have not been able to escape this catastrophe. They are all in turmoil. Although the central banks of the relevant countries have taken various emergency measures to crack down on currency speculation that is causing trouble in the market, They tried every possible means to maintain the stability of their country's market value, but it backfired and they were still unable to get out of the predicament after repeated attempts at various measures. On July 2, Thailand was forced to implement a floating exchange rate system, and the baht plummeted 20% in one day. At the same time, the Royal Thai government, which was about to go bankrupt, sent an application for emergency financial assistance to the International Monetary Fund, Japan, the United States and other major financial institutions. As a result, the Mexican-style financial crisis that had been brewing in Thailand finally surfaced. The world saw its face.
In the early 1990s, when Western developed countries were suffering from recession and the fall of Western civilization seemed to be looming before their eyes, Southeast Asia's economic growth was unstoppable and invincible, astonishing the world. Those white bosses who have always looked down upon others feel ashamed and are filled with jealousy.
In the mid-1990s, Southeast Asian countries invariably embarked on a Great Leap Forward, accelerating the pace of financial liberalization in order to drive a new round of rapid economic growth, and took it for granted that the 21st century would be Asia’s. century, and the century of Asia is the century of Southeast Asia. From now on, the center of gravity of world power will shift to this emerging region, and so on. However, Southeast Asians, who have been top-heavy with imported wine, have ignored the most basic fact: the main driving force for economic development in Southeast Asia in the past few decades has been the increase in external input, rather than the increase in output per unit of input. growth, so on the basis of such a limited growth model, it relaxes financial controls and competes with the world's top financial players to eat the "cake" of the large financial market. It is undoubtedly building a skyscraper on the beach, which is full of hidden dangers and can easily be broken by external forces. .
The wily George Soros has long seen this and kept it in mind. Soros is a person who is accustomed to finding faults and finding faults. With such a huge financial loophole in Southeast Asia, it is natural that he cannot escape his grasp. He has been waiting for the last chance to make a fortune and create another miracle similar to that of beating England.
In fact, as early as 1995, Singapore's Crosby Securities Company made a research report on the economic conditions of seven Asian countries, pointing out that the quality of labor in Southeast Asian countries is low. With deteriorating trade balances and rising inflation, these countries are facing the danger of economic overheating; on the other hand, these countries will encounter a "growth recession" due to excess production capacity, high corporate debt, and a lack of higher education and skilled labor. Recessi0n), risk falling into a dire economic crisis. Crosby & Co. believes that due to rapid economic growth, Southeast Asian companies generally overestimate real estate supply, manufacturing capacity and company personnel size, thus causing "optimistic errors." Relevant authorities' efforts to speed up the liberalization of financial markets often contribute to "optimistic mistakes" and add fuel to the fire. At that time, the economic performance of the entire country will be highlighted by the rise of speculation, the expansion of the bubble economy, and the entire market will be blinded in a seven-color aura of false prosperity, thereby creating an excellent environment for "financial flies" such as George Soros. Offensive opportunity.
However, the Southeast Asian countries, immersed in the joy and dream of the "East Asian Miracle", turned a deaf ear to the above advice, and their attitude was similar to that towards Goltz. Soros has been secretly happy about all this. As early as 1992, Thai economic people, especially those in the financial sector, had a strange idea out of nowhere, thinking that Bangkok should replace Hong Kong, which was about to return to China, and become the financial center in Southeast Asia and the second largest city in the world. Hong Kong. Driven and stimulated by this unrealistic idea, which is equivalent to the Great Leap Forward, the Thai government opened the financial market to foreign capital in a wishful thinking. Sure enough, foreign banks brought a large number of low-interest U.S. dollar loans, and the Thai financial industry reaped the benefits. It became rich and overjoyed, and began to have a strong interest in basic industries such as real estate. As a result, many banks rushed to transfer nearly 30% of the The loans were invested in the real estate industry, causing the real estate industry to develop blindly like the little fat man in Beijing, China, with a serious imbalance between supply and demand. The ensuing downturn in the real estate market has led to a surge in bank bad debts and bad debts, making many loans difficult to recover and severely deteriorating asset quality. According to data from relevant Thai sources cited by Japan's Daiwa Research, as of the end of June 1997, the amount of risky claims held by Thai financial institutions was 486 billion baht, accounting for 31.5% of total loans. Some people even estimate that the bad debts of Thailand's financial industry are as high as 800 billion to 900 billion Thai strains (approximately 31 to 35 billion U.S. dollars). The wanton squandering of low-interest capital and huge deficits in required projects can easily trigger a financial crisis. In 1996, Thailand's required item deficit was equivalent to 8.2% of its GDP, while in 1994, the year when Mexico's financial debt crisis broke out, it was only 7.8%. In this way, it is normal for a crisis to break out in Thailand.
Thailand is playing with fire and burning itself. Soros sent a message to his subordinates. Starting from the beginning of 1997, Thailand's real estate bubble began to lose its luster and soon tended to burst. Foreign investors failed to steal the chicken and lost a handful of rice, so they sold the Thai baht one after another. When Soros saw that the time had come, he fished in troubled waters and personally led the international financial speculators to concentrate all their efforts on attacking the baht fortress built on the beach. For a time, Thailand's financial position was in danger and smoke filled the air. The shock spread to the entire Southeast Asian financial market.
Section 3 Attack! attack! Attack Again
In the 1990s, the international financial market was experiencing storms and crises. Economists all believe that there is a "giant hand" that is invisible and intangible but clearly felt, a terrifying devil-like giant hand wandering around the international financial market. For this giant hand, economists have given it a relatively popular term: hot money.
According to rough statistics from the International Monetary Fund, short-term bank deposits and other short-term securities currently flowing in the international financial market are at least US$7.2 trillion, and there is a trend of increasing day by day. The development of world economic integration has made it possible for the rapid global flow of huge amounts of hot money. To mobilize huge amounts of money, you only need to make a phone call or connect a keyboard, and huge transactions can be completed in the market within a second. On the contrary, in order to avoid risks. Quick withdrawal of funds is also a breeze. Since 1992, Soros led the crowd to beat the British pound to the ground. In 1994, Soros and other big investors made trouble in Mexico, bringing the largest country in Central America to the point where it was almost breaking the pot. The international community has really learned this lesson. All countries seem to be in awe of the power of Soros, who has disappeared and disappeared. Under the leadership of Soros, the hot money in the international financial market is like a wild horse running wild and unpredictable. When the rate of return on capital in a certain area is considerable, hot money will swarm in. As soon as there is any disturbance, especially after the goal is achieved, it will disappear without a trace like a whirlwind.
On July 25, 1997, the roaring Malaysian Prime Minister Mahathir Mohamad cursed the world-famous speculator George Soros as the "black hand" behind the sharp depreciation of Southeast Asian currencies due to speculators' attacks. ".
There are various signs that this "legendary figure" in the Western financial market, who has commanded the hedging fund organization since his huge victory in selling the pound in 1992, has already set his "hunting" target on emerging Asian markets, waiting for opportunities to take action. In 1993, this group of managers who were in charge of the hedging fund organization "tested their skills" in Malaysia and first came to the limelight. At that time, investors generally believed that the market value of the Malaysian currency ringgit was undervalued and it seemed bound to rise. So under Soros's call, international hot money began to surround the ringgit. However, Mahathir refused to buy Soros's currency. To resolutely defend the low market value of the ringgit, Mahathir and Soros each led a side and launched a fierce fight in the financial market. In January 1994, Mahathir ordered to strengthen the control of the capital market. Soros saw that there were not many opportunities, so he had no choice but to lead all the major speculators to retreat and rest their troops to prepare for another war.
In the blink of an eye, two years later, the economies of Southeast Asian countries have exploded and their prosperity has become increasingly evident. As inflation continues to rise and the threat of overheating continues to intensify, interest rates in Southeast Asian countries have continued to rise under the guidance of central banks. Although this can slow down the rise in inflation, it also attracts a large amount of hot money to arbitrage, providing a Soros and others sent troops to fight again. Created new opportunities. A senior executive at Citibank's Bangkok branch pointed out that Thai banks handle an amount of US$2 billion to US$3 billion in overseas diversification every day. also. Because they are profitable, banks themselves borrow dollars, yen, and marks from overseas with interest rates 3 to 5 percentage points lower than currencies such as the Thai baht and ringgit, and then sell these currencies to earn interest rates. According to statistics, the total overseas borrowings of Thai commercial banks have exceeded US$1 trillion, 95% of which are short-term loans of less than one year. According to news from the Singapore foreign exchange market, in the foreign exchange markets across Southeast Asia, the total daily transaction value of the Asian currency forward foreign exchange market reaches approximately US$6 billion, with Thai currency trading volume growing the fastest. In February 1997, the International Monetary Fund's Boorman issued a warning, just two years after the Mexican financial crisis, that a large amount of hot money was being injected into emerging markets such as Asia at a record pace, and "irrational enthusiasm" was pouring into these markets. Appearing widely, this phenomenon can cause painfully large swings.
However, Boorman's voice was still not heard, which made Soros finally determined to use the power of one person to fight against the power of national groups in Southeast Asia. Faced with the prevalence of speculation in various countries' currency markets, central banks in Southeast Asian countries have been hesitant about the rate of change in market capitalization. They are particularly worried that hot money will flow out as quickly as it flows into the country, causing sharp fluctuations in exchange rates. But at this moment, it is very difficult to turn on the reopened capital spigot. Southeast Asian central banks have reached their final moments.
Soros saw the opportunity and took action.
However, this time Soros and his men not only appeared cautious and prudent, but also chose to start with the Thai baht, which had not become the regional currency in the 1980s. Although the interest rates in Indonesia and the Philippines are higher than those in Thailand, the Indonesian exchange rate is often artificially manipulated by Indonesian officials, making it less susceptible to speculation. The Philippines also has more controls on the foreign exchange market, and it is also difficult to let go and have a big fight to decide the outcome. In contrast, Thailand has the most open financial market among Southeast Asian countries, with free capital entry and exit; in addition to higher interest rates, the Thai baht has been pegged to the U.S. dollar for a long time, with a fairly stable exchange rate and minimal risks: On the other hand, Thailand's economy has been "falsely" prosperous The booming and sluggish real estate market is dragging down the financial industry that used to have huge pockets. Therefore, the market value of the Thai baht is actually the most unstable and easiest to break.
The reason why Soros took advantage of Tai Mo was that he took a fancy to the above-mentioned favorable conditions. This is called "capturing the thief first, capture the king". After breaking Tai Mu's fortress, he can completely sweep Southeast Asia. In this way, Soros ordered his men to secretly transfer funds to Southeast Asia, so that when the time comes, he can land in Southeast Asia in a large scale and catch these people who are still dreaming by surprise.
Soros finally quietly declared war on the Southeast Asian countries.
March 3, 1997. The Central Bank of Thailand announced that nine domestic finance companies and one housing loan company had problems with low asset quality and insufficient liquidity. Soros and his men believed that this was a hint of deeper problems that might arise in Thailand's financial system, so they preemptively ordered the sale of stocks in Thai banks and financial companies, and depositors made large withdrawals from all financial and securities companies in Thailand. At this time, the Western impact funds headed by Soros, who were waiting for a large number of Southeast Asian currencies, jointly sold the Thai baht. Under the siege of many Western "heroes", the Thai baht was unable to resist for a while and continued to decline. In May, it jumped to a minimum of 1 US dollar. 26.70 baht. The Central Bank of Thailand devoted all its efforts to launching an anti-encirclement and suppression campaign against Soros in mid-to-late May, aiming to break Soros's will and make him retreat in the face of difficulties and no longer lead the public to attack the Thai baht group.
In the first step, the Central Bank of Thailand formed a coalition with Singapore and spent about 12 billion U.S. dollars to absorb Thai mills; in the second step, it followed Mahathir’s strategy and tactics in 1994 and strictly prohibited it with administrative orders. Local banks lend money to Soros' army; the third step is to significantly raise interest rates, with overnight interest rates rising from about 10% to 1,000 to 1,500%. A three-pronged approach, cutting-edge weapons, and powerful counterattack caused Taimo to rise to a new high of 2520 on May 20.
Due to the sudden tightening of money, interest costs increased significantly, which caught Soros's army off guard, resulting in a loss of US$300 million and a blow.
However, Soros is still Soros after all. Based on his intuition, Soros believes that the Central Bank of Thailand can use no more tricks than this. After the Thais tried their best, they did not put themselves in a desperate situation, and the losses they suffered were relatively small. Relatively mild. From a certain perspective, Soros thinks he has already won. For the Southeast Asian countries, the initial victory was just a flashback before the catastrophe. It could not damage their vitality at all, nor could it save the fate of Southeast Asia's financial crisis.
Soros has been working hard for this opportunity for several years. This time he came prepared and determined to win. A setback for the vanguard force will not make him give up. Soros will fight in Southeast Asia three times.
In June 1997, Soros sent troops again. He called on the three armies to regroup and ordered hedging funds to start selling U.S. Treasury bonds to raise funds to expand the size of Soros's army. The Thai baht launched a fierce attack. In an instant, the flames of war reappeared in the Southeast Asian integrated market, and the smoke filled the air. The opposing sides launched a hand-to-hand battle. Thailand was in chaos, and the war situation was complex. The major exchanges were like boiling hot soup, and people were going crazy. The ground was running and howling.
This is a war of individuals against the state. From a formal point of view, this seems incredible; however, from a result point of view, it is even more puzzling.
After a brief battle, the Central Bank of Thailand, which only had a mere US$30 billion in foreign exchange reserves, declared that it was "out of ammunition and food." Faced with the overwhelming Soros army, they had to maintain a fixed exchange rate for the Thai baht. Powerless. The Thais had no choice but to resort to a last resort, to dig out their flesh and mend the sores and implement a floating exchange rate. Unexpectedly, this had been expected by Soros, and he had made various preparations for this. Various countermeasures were implemented one after another, and the fate of the Thai baht was determined by Soros on the cross of shame. The Thai baht continues to decline. On July 24, the Thai baht fell to 32.5:1 against the US dollar, hitting another historical low. The situation of being slaughtered by Soros is really terrible for the world. The Thai people are even more frightened, beating their chests and asking the sky. .
However, after defeating the Thai baht city, Soros was not satisfied with this. He concluded that the Thai baht's sharp depreciation would lead to the collapse of other currencies, so he ordered to continue to expand the results and swept the entire army across Southeast Asia. Soros secretly vowed that this time he would plunder all the countries in Southeast Asia and destroy the dream of this group of unscrupulous people who tried to replace the West.
Having heard that Soros's army was making trouble, other Southeast Asian countries put in all their strength to mount a desperate resistance. The Philippines sold US$2.5 billion and Malaysia sold US$1 billion to stabilize their currencies. However, they were unable to prevent the depreciation of the peso and ringgit in the face of Soros's powerful offensive. At the same time, the Indonesian rupiah and the Singapore dollar also fluctuated violently. For a time, the Southeast Asian currency market was in turmoil. Is this a precursor to a financial crisis or the end of a financial crisis? I'm afraid no one dares to jump to conclusions. Perhaps only one person knows the secret, and he is Soros. Section 4: Soros's Storm
Everyone who has ever played against Soros always feels a sense of shame when talking about him. Some call him the devil, others call him an angel. However, there is no doubt that Soros is a very powerful figure. In the world, perhaps only the hurricanes in North America can compare with him: before the wind blows, no one can predict it; but once the wind blows, only broken walls will be seen wherever it goes. The ruins, the living things and the charcoal, are a scene that is too cruel to behold. After the incident, there was no trace of it immediately, and the wind and sun were beautiful, illuminating all things.
At that time, the British Empire emptied its treasury and spent tens of billions of dollars in an attempt to stop the attack of George Soros, the North American hurricane. However, the power of the once arrogant British dynasty had long since faded, and it was gone with the east of the Yangtze River. , ultimately failed to defeat Soros, and was forced to devalue the pound by 15%, and at the same time withdrew from the European Monetary Basket - the Unified Exchange Rate Mechanism. Soros alone caused the most serious trauma to the European unified currency process. To this day, the British and Europeans who have not yet recovered their vitality still hate Soros with a passion. When Soros is mentioned, they curse him as "Shylock" (the Jewish businessman in Shakespeare's "The Merchant of Venice", a money-hungry man). Through this campaign, Soros added another $1 billion to his bank account. Subsequently, Hurricane Soros swept towards the south. During the financial crisis in Mexico, this large Latin American country was almost destroyed, the country was destroyed, and the family was destroyed, making a lot of profits.
This time, Hurricane Soros traveled across the ocean, traveled thousands of miles, and spared no effort to attack many small tigers in Southeast Asia. Although he attacked three times and refused to let go, he finally won a great victory and captured all these hundreds of millions of tigers. The little rich people were so frightened that they could not stop praying for the mercy of the Savior all day long.
Soros’s massive campaign against the princely states of Southeast Asia really taught them a lesson.
With the selling of Thai baht and the frenzy of buying US dollars, a large number of factories began to close down, companies reduced their employees, prices rose sharply, and the living standards of urban residents dropped sharply. In the silent attack launched by Soros, on July 29, 1997. The governor of the Central Bank of Thailand voluntarily announced his resignation, but before that, Thailand's deputy prime minister in charge of the economy and minister of finance had already resigned and returned home with regret.
The furious Malaysian Prime Minister Mahathir sternly scolded Soros by name, while the furious Thais vowed to bring Soros to justice and be captured and sentenced to prison in Thailand.
Silence, silence, Soros said nothing, and later simply said that it was his subordinates who did it, and that he, the Iceman, knew nothing about it, and so on. As for Stanley Druckenmiller, the head of the Soros Fund, he was beaming with joy after the devaluation of the Thai currency and could not contain his inner joy. Declare loudly:
"We won!"
Following the Battle of Thailand, Hurricane Soros quickly swept through Indonesia, the largest country in Southeast Asia. In an instant, "Black Monday" appeared in Indonesia. The Indonesian rupiah depreciated sharply, and people rushed to buy US dollars. Since July 21, the Indonesian rupiah exchange rate began to fall sharply, and its decline has broken historical records. Since the beginning of the year By August 20, the Indonesian rupiah had depreciated by about 23% against the US dollar, far exceeding the government's wishful thinking target of 5%-6% per year. The magnitude of the depreciation was second only to Thailand's in Southeast Asia. Due to the impact of the exchange rate, the stock composite index of the Jakarta Securities Market has also fallen again and again. In the first three months of August alone, it fell by more than 20%, falling by 150.55 points in one month. The Indonesian banking community, economic circles and the public were crying.
After the devaluation of the Indonesian rupiah, the most obvious impact on the Indonesian economy is that the cost of manufacturing, which is mainly based on imported raw materials, has increased sharply, resulting in a sharp increase in the prices of products including automobiles and computers. Prices of construction materials have risen, and prices of major daily necessities have also increased by 5% to 13%. Industry economists believe that rising prices will push the inflation rate this year from below the expected 6% to over 8%. Due to the currency interest rate zone, the debt of various companies increased by 100% overnight, which will cause Indonesia's foreign debt, which currently exceeds 110 billion US dollars, to further increase.
This shows the power of Hurricane Soros. .
Soros’s power in Southeast Asia has shocked the planet we live in: politicians and business people around the world have responded in various ways.
Due to the shock wave of Soros. The remaining power is still showing its power, and it quickly spread to the Brazilian stock market and the Polish currency zloty, and then attacked Singapore, Taiwan and Greece, prompting the US Treasury Department and the International Monetary Fund to be on high alert due to the financial turmoil in Southeast Asia, and The value of currencies and securities from Asia to Latin America and Eastern Europe has declined.
On July 17, the frantic Greek government admitted that they had to spend $800 million from the treasury to support the drachma (Greek currency). ), because speculators are betting that the drachma will fall.
The unstable situation made the International Monetary Fund and U.S. government officials uneasy about the consequences of Soros's troubles in Lucica. With the memory of the crisis still fresh, which sent Lucifer into a deep recession and shook financial markets, a senior Clinton administration official said: "We are certainly in close contact with the IMF, and they are certainly in close contact with us. Affected countries remain in close contact. "
Jack Boorman, head of the Policy and Research Department of the International Monetary Fund, said: "We do take this issue seriously. We have concerns about individual countries and are concerned that some kind of contagion from one market to another may begin to occur.
On July 19, the Thai currency depreciated significantly. Just before that, the Czech Republic, the "darling" of Central Europe, announced that it would abandon its fixed exchange rate and replace it with a floating exchange rate. exchange rate. There were immediate repercussions on the other side of the distant Pacific: Brazil and Argentina in Latin America felt the earthquake, their stock markets generally fell, and there were rumors that the Brazilian currency, the real, would depreciate. In this way, the index of the Sao Paulo Stock Exchange, Latin America's largest stock exchange, fell by 15%, which is equivalent to a 1200-point drop in the Dow Jones Industrial Average.
Hurricane Soros has the potential to create a swingback effect that could pose a threat to the U.S. own economy, especially if it continues to spread.
Anthony Chen, chief economist at First Bank Investment Consulting in Columbus, Ohio, said: "If there are many more turmoils like this, it will bring more uncertainty to the world. This is not good for any country.
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Soros’s rise in financial markets has caused the domestic debt and trade deficits of many developing countries to surge. This will eventually hinder their rapid economic development not long ago, and in turn, It may affect U.S. exports of goods and services to these countries. Currency depreciation may help these countries sell more products abroad, but at the same time make U.S. products much more expensive, especially as the dollar becomes stronger. "This is the major danger facing the U.S. economy," said Thea Latayuen, senior economist at McGraw-Hill who studies finance in Lexington, Texas. "
It seems that what Soros brings back to the United States is not always charity funds. Perhaps one day, he will become some type of persona non grata in the United States. Appendix 1 France "Liberation" "Newspaper" article:
Currency typhoon sweeps across Asia with traces
After being drunk on tequila soju, will now we be drunk on sake? Will the sudden financial crisis affect us? All emerging countries in Southeast Asia? Since Thailand devalued (a 20% depreciation on July 2), from Kuala Lumpur to Jakarta, from Yangon to Manila, all countries in the region have experienced currency crises. The expert said: “This is just the beginning. What we see now are just ordinary little firecrackers before the fireworks are set off. "He believes that the shock wave caused by the devaluation of the Thai baht may affect more than a dozen emerging countries in Asia, Eastern Europe, and Latin America.
So far, the domino effect of the devaluation of the Thai baht has already affected the Philippines, Indonesia, and Myanmar. And Malaysia's currency had a huge impact. On Friday (11th), under the pressure of speculators, the Philippines had to let its currency peso fluctuate, depreciating nearly 7% in a few hours. On the same day, Myanmar's kyat fell. The exchange rate on the free market has also reached a record low: 240 kyats to 1 US dollar (for several months, this ratio has remained around 160:1, and a downward trend began a few weeks ago).
Changes in price comparisons have had an impact on commodity trade: the prices of some imported items have increased by nearly 30% in a few days, and Malaysia has become a victim of growing speculation in the ringgit (Malaysia’s currency). To this end, the Central Bank of Kitangpur had to decide on Friday (11th) to increase the interest rate from 9% the previous day to 50%. In this way, the cost of speculation (from bank loans to sales on the market) increased.
Japan, the most powerful country in the region, tried to put out the fire. The Japanese authorities decided to provide US$1 billion in funds to maintain the stability of the Thai baht. The purpose of this move is to prevent a recurrence of the 1994. A major disaster like the Mexican financial crisis. Tokyo is also trying to get the Asian Development Bank to take action. According to relevant sources, Bangkok is seeking US$20 billion in assistance. A delegation from the organization has arrived in Thailand to find out the current status of the financial crisis here and take appropriate measures as soon as possible.
So far, the Asian country's take-off has been an example for people to follow. What explains these "surprises"? "Most countries in the region are facing excessive industrial investment, a real estate crisis, rising imports, and economic growth," said Fadil Racua, an economist in charge of emerging countries at the French bank Caisse et al. Problems such as slowdown and unreasonable structure.
The cause of Thailand’s financial collapse was real estate speculation. In mid-May, domestic and foreign investors who had invested large amounts of money in financial institutions investing in real estate discovered that the profits of these financial institutions were no longer as good as before. These financial institutions have invested a total of 230 billion francs in real estate, and the amount of unpayable loans totals 70 billion francs. More than half of the 100,000 square meters of office buildings that have been built cannot find buyers. This is just an estimate. All in all, most financial institutions are unable to repay funds borrowed from international markets. Doubts began to arise, which turned into fears of disaster. As economic growth slows (Thailand is likely to grow 3.5% this year, compared with 7% in 1996 and 8% in 1995), Thai banks and foreign investors have less hope of recouping their investments. The money just disappeared.
After the speculative bubble burst, various vulnerabilities in Thailand’s system began to show. The first is the fragility of the exchange rate system. The Thai baht is primarily pegged to the US dollar. The U.S. dollar has been rising against other major currencies for more than a year. For Thailand, an increase in the dollar price means a decrease in exports. Next is competition from China, India and Vietnam: Thailand's exports also face low-wage competition, which forces some entrepreneurs to move to areas with lower wages.
As a result, Thailand's relevant economic indicators have become very dangerous in the eyes of many experts.
Whether it is the Philippines, Indonesia (Myanmar or Malaysia), these countries are more or less similar to Thailand. In order to help domestic disease-ridden banks, in order to make up for the trade deficit, in order to expand industry To invest, these countries must borrow money from the international market.
However, as these countries are now realizing, foreign investment—which has long been the engine of these economies—actually has its pros and cons. Investors and speculators who were once very confident are constantly on the lookout for any signs of devaluation. In order to ensure the stability of the domestic currency, the countries concerned have almost no choice but to significantly raise interest rates, which will in turn stifle economic activity.