The main thing is that the United States is raising interest rates, driving many countries to raise interest rates, and the logic is roughly like this:
Because the United States is a global hegemon, the dollar is bound to oil transactions, the United States has mastered the dollar hegemony, the dollar has become the de facto global currency, and the Federal Reserve is equivalent to the world's central bank. Many national and regional currencies are actually anchored to the US dollar, such as the Hong Kong dollar.
During the dollar interest rate cut, because of the low interest rate, a large number of capitalists will borrow a large amount of dollars from the United States to invest in other emerging markets, such as Vietnam, South Korea, China and other well-developed countries. Because the profits of capital investment in these countries are high, a large profit can be obtained by covering interest.
And after the dollar enters these countries, it is necessary to change it into the local currency of this country to use, the dollar is stored in the country's bank to become a dollar reserve, after these money goes in, this actually causes the country's currency to be over-issued, especially when the amount is very large, which is equal to a lot more money in the market, equivalent to inflation, these money are invested everywhere to build factories, providing a large number of jobs, a large number of residents of this country find it easy to find a job, it is easy to earn money, a lot of money into the stock market.. The housing market has caused stock prices to rise, so everyone feels that the economy is prosperous.
When the dollar enters to raise interest rates, these capitals will see that the interest rate is getting higher and higher, and the profits earned in emerging market countries can no longer or are difficult to cover the interest, and these hot money will withdraw from emerging market countries.
And the country's domestic capital will also fleeing in exchange for dollars for the following reasons:
- Domestic industry has large risks and low profits, it is better to exchange dollars to deposit in banks and eat interest.
- Considering that the United States uses the tide of the dollar to harvest emerging countries, it is very risky to continue to hold its own currency depreciation, and switching to US dollars can not only preserve its value, but also come back to the bottom after the collapse of its own assets.
- If the interest rate of the country is low, you can borrow a large amount of currency from the country, exchange it for US dollars and run to the United States to eat the interest difference, which is risk-free arbitrage, plus the risk of local currency depreciation, and even the profit is not low.
When these hot money are to be re-converted from the country into US dollars, this will have an impact on the country's foreign exchange reserves, resulting in a decline in foreign exchange reserves, which will further devalue the country's currency, and the currency depreciation will continue to increase capital outflow, becoming a vicious circle.
Therefore, many countries will follow the United States to raise interest rates, and the logic of interest rate hikes is: Brothers of capital, you look at the US interest rate 4%, you save money in me this year 5%, earn more than the United States, you don't run away with your money, stay in the country. As long as your capital does not go, our foreign exchange reserves will be stable, the economy will continue to prosper, the exchange rate will not depreciate, and we will not fall into a vicious circle. Is it useful? It has a certain effect, but once it reaches a certain level, it will accelerate death.
Here's why: Due to the withdrawal of a large amount of hot money, it is equivalent to writing off the same amount of national currency at home, resulting in a decrease in domestic currency circulation, which is equivalent to going in the direction of deflation. Because the economy overheated inflation before there was more hot money, inflation fell after less money, the original overheated market will cool down rapidly, the housing market and stock market will fall, factories will close, jobs will be reduced, and the economy will deteriorate. Logically, at this time, interest rates should be cut, loans should be increased, and the national currency should be released to make up for the gap left by this part of the hot money. But as mentioned earlier, your home country cuts interest rates, the United States raises interest rates, the interest difference is too big, there will be people who borrow at home and go to exchange for dollars to eat the interest difference. It will still cause capital outflow, impact foreign exchange, and currency depreciation.
What about the interest rate hike, the interest rate hike itself will also reduce the liquidity of the currency in the market, because your interest rate is high, the interest of your own loan will also be high, which will easily lead to an increase in the burden of loan enterprises, a decline in profits, and a break in the capital chain and collapse. Secondly, if the industry finds that the interest rate is high and risks the profits of the industry, it is better to deposit the money in the bank, it will choose to close the enterprise and factory, which will also deal a blow to the industry. It will also increase the outflow of hot money.
So in this way, both interest rate hikes and rate cuts are dead ends?
In fact, the handling method is not only to choose between raising interest rates and cutting interest rates.
In the final analysis, the essence of this problem is the problem of foreign exchange reserves. Whether interest rates are raised or cut, it is to keep hot money in the country, do not exchange dollars, run on foreign exchange reserves. The above logic is straightened out, so now we can talk about why China can choose to cut interest rates when the United States is interested.
- First of all, the most important point is that China has foreign exchange controls. However, in the final analysis, it is the problem of foreign exchange reserves, so if I hold the valve in my own hands, won't I take the initiative? I have the final say on how big the water valve opens, you can go with money, but you have to queue up, you can't jerk in and out. Many countries harvested by the financial crisis caused by the tide of the dollar did not have foreign exchange controls, such as South Korea and Thailand. You can only watch as you are harvested. Of course, not all countries can learn from China to play foreign exchange control, this China has special characteristics. There was a time when China relaxed its foreign exchange controls, and its foreign exchange reserves fell from four trillion to three trillion yuan in a short period of time, and then it was immediately stopped, and then Wang Xiaoji was cleaned up, which is the reason.
- China's foreign exchange reserves are huge, thanks to its position as the world's factory, China has been in surplus for a long time and has accumulated a large number of foreign exchange reserves. There are three trillion yuan, equivalent to blood thickness ◇ Your capital outflow deducts my blood is not afraid, the valve is in my hand, slowly buckle, consumption up, and because of the surplus, there are constantly foreign exchange reserves replenished, which can hedge the loss of capital.
- China's business environment is excellent, thanks to China's good epidemic control, factory operation efficiency is guaranteed, and there is infrastructure, institutional guarantee, industrial cluster advantages, energy price stability, etc., and there is a unified large market of 1.4 billion people, in a word, business can make money, compared with the epidemic in foreign countries, workers are repeatedly infected with the new crown, low efficiency in starting, and insufficient product production. During the epidemic, a large number of orders turned to China, making a lot of money, and the willingness to leave assets decreased. The simple summary is that China has money, willful, the valve is in my hand, I am not afraid that you will rush away, there is constantly small money coming in, I am not afraid of interest rate cuts, this point of capital loss can withstand it, and there are also Europe that came to China to hedge because of the Russian-Ukrainian war ○ energy price increases. And your foreign capital goes, resulting in a decrease in domestic monetary flows and economic deflation, I can supplement liquidity by cutting interest rates and reducing the reserve ratio, reducing the impact, stabilizing the domestic economy, and avoiding the collapse of a large number of enterprises.
The fact that China can cut interest rates does not mean that other countries can learn from China. Husky national iron tough interest rate cut, domestic inflation 80%, this tumultuous operation everyone can not understand. Probably to protect their domestic enterprises. Anyway, it has collapsed, and inflation is better than deflation. Combined with the recent news, the Vietnamese Prime Minister came to China to meet his eldest brother, do you guess why he came? After reading the above logic, I don't know if you understand? Vietnam was cut by the United States and could not stand it. So come to China for help.
How do you guess China helps?
Some people have calculated that Vietnam's foreign exchange reserves are not enough to cope with capital outflows and debt repayment.
The way China can help Vietnam is to lend RMB to Vietnam and replace US dollar debt with RMB debt, because RMB interest is low, which is equivalent to replacing high-interest loans with low-interest loans, and repaying less money every month can ease the breath.
Vietnam took the renminbi to the international exchange market to exchange it for US dollars to pay off its debts, which is the reason for the recent depreciation of the renminbi against the US dollar. China is helping Southeast Asian countries to replace dollar bonds with RMB debt to avoid them being harvested by the United States, and at the same time to let the United States consume itself because it cannot harvest, so that the United States itself can raise interest rates until it can't stand it and collapse, when the dollar hegemony will completely collapse, and the United States will fall into hyperinflation.