The Son of Finance of the Great Age

  Chapter 93 The signal is coming

   "Stanley, it's time!" When Soros rushed out of the venue immediately, he dialed the transoceanic satellite phone and said affirmatively to Druckenmiller who had been waiting at the other end.

  He finally got the information he wanted, and now he can confidently and boldly short the pound.

  Drukenmiller on the other end of the microphone understood, silently put down the phone, and shouted to a group of traders who had already been waiting outside: "Everything is OK!"

  Everyone was silent for a few seconds, and then shouted crazily almost at the same time, with frenzied expressions on their faces. After a short period of excitement, each of them immediately rushed to their work positions and began to implement the strategies that had been formulated.

  These strategies are to do related transactions in the stock market, foreign exchange market, bond market and other markets, and to obtain the greatest benefit from the chain effect brought about by the fall of the pound as much as possible.

   For a while, the trading room was in chaos.

  Like Soros, Zhong Shi gave relevant instructions to HSBC after one step out of the venue.

  His funds have come to the British market through HSBC channels. The reason why he starts to operate now is because he only knows that the pound will fall in a certain period of time in the future, but he doesn't know why or what is the trigger.

  Two billion dollars seems like a lot of money, but in the foreign exchange market, it is basically not even the fraction of the daily settlement. At this level of trading, he cannot be careless.

  After explaining a few words on the phone, Zhong Shi and Andrew found an exquisite and elegant restaurant. The two had a delicious meal and discussed where to go next.

  The reason why Zhong Shi has such a long free time is because he has passed the SAT test in Hong Kong in the United States. After preparing a lot of complicated application materials, he now only needs to quietly wait for the news from the United States.

  If the offer comes down, according to the current time, he can only enter the spring semester, that is, until January 1993, so he has a lot of time now.

In terms of schools, Zhong Shi applied to Princeton University, University of Chicago, University of Pennsylvania, University of California, Berkeley, and Columbia University. The reason why he did not choose Caltech in his previous life was because he thought he had already spent several years there. It is necessary to continue.

On the east coast, schools such as Harvard and MIT are well-known, but Zhongshi has his own considerations. For example, Princeton and Berkeley are basically the strongest in the United States in terms of mathematics. University of Chicago's economics and Penn University's Wutter School of Business No. 1 in the world, Columbia is located in New York State, very close to Wall Street.

  …

Three days later, the Wall Street Journal published an exclusive interview with Schlesinger. In the interview, the head of the Bundesbank described the current situation of the European currency: "The instability of the European monetary system can only be solved by the devaluation of some national currencies... Germany will not cut interest rates..."

  Although the words are very vague, and it is not clear who the "certain countries" are, but for the financial speculators who have long been eyeing the lira and the British pound, the object of the hint is almost ready to come out.

As early as August, the value of the pound sterling fluctuated unusually. Chancellor of the Exchequer Lamont even delivered the most severe speech in front of the Treasury building at the end of August, which was generally regarded by the outside world as an ultimatum to financial speculators : "In order to clarify the UK's position, I don't think it is possible for the pound to depreciate, and the UK will not withdraw from the exchange rate mechanism. We have an absolute obligation to the exchange rate mechanism. This is the core of our policy."

  In addition to Lamont, Prime Minister Major has also repeatedly advocated similar views in public. In addition to these encouraging speeches, the UK has indeed taken corresponding measures in the market, such as buying 3 billion pounds to intervene in the market, and institutions such as the World Bank and the International Monetary Fund have borrowed huge amounts of funds to continue intervene in the foreign exchange market.

   These moves are in stark contrast to Schlesinger's views today. Now, everyone involved knows that Germany will not save Britain.

   Now only the Bank of England itself is left.

   No, or the Bank of England and the Central Bank of Italy are also under fire from international financial speculators.

In fact, on September 8, the day when Schlesinger held a press conference, the Finnish mark announced that it would be separated from the German mark and allowed to float freely. alert. Although Finland is not a country of the European Community, although the sparrow is small and has all the internal organs, such a country is basically helpless in the frenzy of the Finnish mark being sold, which makes the leaders of several countries such as Britain, France and Italy Feeling chilling.

   The pound is okay, but the lira's decline is imminent!

As early as September 7th, the Italian government announced to increase the bank’s discount rate. As a result, the market’s reaction was not satisfactory. As a result, on the 9th, one day later, Italy was forced to announce another increase in the bank’s discount rate from 12%. to 15%. At the same time, they bought lira in the foreign exchange market and sold currencies such as francs and marks. The result was that the lira remained within the European exchange rate system.

Discounting means that when an individual, enterprise or institution needs short-term liquidity, they mortgage securities, real estate, capital and other valuable things to the bank, and then borrow money from the bank at a certain interest rate, which is equivalent to short-term liquidity. loan.

  International financial speculators want to attack the lira. It is impossible for them to hold the lira, because in their view, it is a currency that is about to depreciate and is not worth holding. Therefore, they mortgaged the US dollar and mark assets in their hands to the Italian bank, exchanged them for the corresponding amount of lira at the price of the discount rate in the short term, and then sold them in the foreign exchange market. The market bought it back and returned it to the Italian bank.

For example, if someone has US$10,000 in assets and can exchange for six million liras, then when the lira depreciates, the six million lires may only cost US$9,000, and this person has made a profit during the lira depreciation process. thousands of dollars.

The first thing the Central Bank of Italy can do is not allow the lira to depreciate so much, which requires buying lira in the foreign exchange market to maintain it at a specific position; the second is to raise the cost of speculators, making It is difficult for them to borrow a large amount of lira. The specific operation is to increase the discount rate.

  This creates two problems. The first is whether the central bank has enough foreign exchange reserves to stabilize the currency value. The second problem is that the discount rate cannot rise indefinitely.

If the currency value can be stabilized and the discount rate is increased, the cost of international speculators will be greater than the income, and they will collapse without fighting. But if the currency value cannot be maintained, the income will exceed the cost, and they will chase after it Until one side is completely defeated.

   Now it seems that this party is most likely the Central Bank of Italy.

  On September 12, when Schlesinger's words appeared in the newspapers, the lira plummeted all the way, and there was a large number of selling orders in the foreign exchange market, and the prices fell one by one. Under such circumstances, the Central Bank of Italy urgently mobilized funds and bought lira in the market, but it still could not withstand the menacing selling orders. By the end of the day, it had already approached the lower limit stipulated by the European Monetary System.

   It should be noted that the foreign exchange market is an all-weather market with fluctuations 24 hours a day. Compared with other currencies, the biggest market for the Italian lira is itself, and the biggest buyer can only be the Central Bank of Italy.

  After emergency consultations between Rome and the Central Bank of Italy, and after obtaining the consent of the finance ministers and central bank governors of other European Community countries, on the 13th, the Italian government announced that the lira would depreciate.

The announcement of the depreciation this time lowered the price of the lira by 3.5%, and at the same time increased the value of several other currencies in the European monetary system by 3.5%. The goal can be regarded as initially completed.

   This is the first adjustment of the European Monetary System since 1987. For the first time, this seemingly colossal thing showed its fragile side in front of international speculators.

  The Italian lira temporarily escaped death by automatic devaluation.

   Soon, speculators turned to the pound market with huge profits and started a new round of attacks.

Zhongshi’s funds stored in Italy appreciated by more than 5% in one day, that is to say, within one day, he didn’t need to do anything, but he gained five points of wealth out of thin air. Of course, the wealth should be paid in lira calculate.

  Since some people have more wealth, some people must have less wealth, so the loss of wealth will naturally be borne by the Italians, who use the lira as the main transaction currency. Just like the yacht companies and car companies that do business with Zhongshi, these companies are victims of the devaluation of the lira.

  Of course, depreciation is not a bad thing, at least the price of domestic goods has dropped, which is more conducive to export.

  The ratio of the British pound to the Mark at this time is 2.7964, which is less than a percentage point away from the lower limit of 2.7780 stipulated in the European exchange rate system.

  The exchange rate has been gradually attacked by international speculators since August, and has slowly approached the lower limit. In the process, the Bank of England has used more than three billion pounds of foreign exchange reserves to maintain this price.

  After Schlesinger made his public statement, in just one day, the lira was attacked and almost left the European monetary system, which made the finance ministers and central bank governors of various countries feel the seriousness of the crisis. Although Italy is not a traditional industrial power, it is also one of the developed countries. It is so vulnerable to international funds, which makes them feel bad.

  They once again held urgent telephone consultations to urge the Bundesbank to lower interest rates. (Thank you for your recommendation votes in the past few days. The author is very satisfied with this. I hope to work harder and vote for a few more Sanjiang votes. Thank you~)

  (end of this chapter)