1 made a picture to facilitate everyone to understand what many financial news are talking about in the current "USD interest rate hike cycle". What does
mean? Whenever there is a news report that a country's economy has XX problems, the above picture can help you clarify which level it is talking about.
gives a few examples around the above picture.
2 In the picture above, you have to run out from the innermost layer by layer -
First, cash out the assets in your hands → after getting the local currency → then purchase foreign exchange and exchange them into foreign currency.
3 Another example is that Russia was extremely restricted by the West in March this year. Energy trade, as the lifeline of the economy, was stuck, the growth of the real economy was worrying, and sovereign credit risks emerged.
rubles exchange rate first responded and began to plummet. Why is the exchange rate first responding? It's very simple. The essence of the exchange rate is the price - the price of foreign currency.
Russia began to take action at the local currency and interest rate levels. First, violently hikes interest rates , and the interest rate is in place to 20%, making the ruble's return very tempting and supporting its appreciation. The weaker the currency, the more people want to run. The currency is strong and the returns are high, so the funds have the motivation to stay.
Then Russia started to deal with the inner layer, the stock market stopped trading , locking liquidity, I can't sell it, I see how you can smash it.
has another interesting thing. A logic we are familiar with is: If the economy is not good and the stock market is poor, then buy bonds and safe-haven.
But Russia tells us that once there is a risk in sovereign credit, the logic changes completely and the ability to repay debts is questioned. Who will buy bonds? Everyone will turn to sell, bond prices plummeted, and bond yields soared.
4 For example, the Turkey , which rubs Western economics at the local level, has a current inflation rate of 80%, the highest in the world, but it still does not raise interest rates to tighten liquidity, but is required to cut interest rates again and again, like this:
We know: real interest rate = nominal interest rate -inflation rate
So the actual interest rate in Turkey is 12%-80%=-68%, ordinary people deposit banks depreciate by 2/3 in a year, and fools save it.
However, banks cannot recover liquidity, so the real economy can only further inflation.
5 And for example, why are many economies that rely on import and export trade prone to ?
mainly has problems with the outermost layer.
You can imagine that every country has two bank cards: one is called "current account" specifically used to do business with others (import and export trade) , and the other is called "capital account" specifically used for transfer and capital flow.
Both accounts are inflows and outflows of global settlement and denominated currencies - USD.
Take South Korea as an example, it is a typical outgoing economy.
commodity inflation, South Korea's import costs have increased, accelerating the consumption of foreign exchange reserves.
Japan's economy is weak, China's motivation to buy chips weakened, and South Korea's exports are also reduced.
import and export, trade deficit , current account loss, foreign exchange reserves decreased.
The short-term problem is not big, but South Korea's current account deficit lasted for a long time from January 1994 to October 1997, which eventually led to the foreign exchange crisis transmitting from the outside to the inside, turning into a financial crisis and a decline in economic growth.
From January to August 2008, during the global financial crisis, South Korea's current account deficit once again, causing turmoil in the South Korean financial market and the real economy.
At present, South Korea's trade deficit has once again.
6 2 There are two biggest troubles when foreign exchange reserves decline:
First, imports need to be settled with foreign exchange. If foreign exchange is not enough for imports in the month, it will be a big trouble.
Second, foreign debts also need to be settled with foreign exchange. If foreign exchange is not enough, the current debt will be repaid and the debt will default, and there will be a big trouble. Why is it so troublesome to
? The outer crisis will definitely be transmitted to the inner layer, causing systemic risks, commonly known as ABCScris
- Asset price crisis in real estate stocks and bonds Asset crisis cris
- Banking crisis Banking crisis
- Currency crisis Currency crisis 4
- Sovereign debt crisis (Fiscal unsustainable) Sovereign debt crisis
7 When "past" is similar to "present", it is the most interesting to read history.
For example, this year, looking at the history of EU , the history of large inflation, the history of European stock market performance during World War II , the history of Japan-US trade war, and the thirty years lost by Japan... are all particularly interesting. The rumors about
Credit Suisse have made more articles reviewing the bankruptcy of Lehman Brothers and the subprime mortgage crisis in 2008.
is still the same thing, history is actually future study , this year is particularly suitable for reviewing history.
