Vol 3 Chapter 60: Super big pit

"Turnip, we need to have a large number of financial companies in the European market. London is the first stop. I hope you solve this first."
Finance Company?
Robert John was a little dazed.
The so-called financial company mainly refers to short-term lending companies, which can also be understood as loan sharks.
Of course, there are differences between a formal financial company and a loan shark. Commercial bank loans often attach great importance to collateral. Without collateral, it is impossible to obtain loans from banks.
Everyone lacks money.
If money is needed and the collateral has a reputation risk, the bank will raise the interest rate or cut off the loan based on the risk ratio. Or, the bank’s reputation loan needs to be used after it expires, but it must be paid back to perform the contract to continue the application. At that time, the usefulness of the finance company became apparent.
You can borrow funds with better risks, and you can also help some loans to cross the bridge.
Many financial companies in Hong Kong have been doing very well in this regard. With high profits and the leverage of operating financial products, they are mixed.
It's just that the British economy has been in a downturn in recent years. The Bank of England has continued to implement a low interest rate policy. The benchmark interest rate has been maintained at 2.2%. At such an interest rate, if a finance company relies on lending for a living, it will not make any profit at all.
"Boss. The Bank of England's benchmark interest rate has been maintained at 2.2%. The European Community countries have also maintained the same interest rates. Opening a financial company in Europe, I think, is not a good idea."
"No, no, turnip, listen. We open a financial company, not a financial company. We only open a financial company, so we open a financial company."
"..."
Robert John is a Chinese Tong.
However, what Shen Jiannan said in this passage was still stunned.
Taking a look at the ex-wife's family who was about to get up not far away, Robert John said quietly.
"Boss. I don't understand what you are talking about."
"Turnip. Leyson. The interest rates implemented by European countries have been 2.2%, right."
"Night die. This kind of interest rate, the financial company has no room for survival."
"If there is a country where the interest rate is very high, and the foreign exchange price is a fixed exchange rate?"
Robert John understood at once.
"Boss. You mean Thailand? God. Boss, you are such a genius. I didn't expect it."
"understood?"
"Damn! I'm so stupid. My God, boss, we are going to be rich."
Holding the phone, Robert John shouted excitedly.
He had been in China Xia before. As the head of Standard Chartered China Xia region, he was very clear about the exchange rate in the Asian market.
The currency of Thailand is the Baht.
Before 1897, one baht was equivalent to 8 fuang, and one fuang was equivalent to 8 att. The current decimal system was set by King Rama V.
However, the name was tical before the 1940s and was later renamed baht. Originally the baht was a unit of weight, equivalent to 15 grams. Since a tical is equivalent to 15 grams of silver, the baht was simply used as the name later.
After the silver standard shattered in 1902, the baht was no longer linked to pure silver because the price of silver depreciated significantly relative to the gold standard currency. On September 19 of that year, Thailand issued the first batch of banknotes with denominations of 5, 10, 20, 100 and 1000tical.
By 1963, the Thai government announced that the gold content of the Thai baht was 0.0427245 grams, the official exchange rate was 1 U.S. dollar equal to 20.80 baht, and the floating exchange rate was stopped.
However, with the collapse of the Brinson System and the devaluation of the U.S. dollar, the Thai government announced that the Thai baht was delinked from the U.S. dollar and changed to a basket of currencies. The Foreign Exchange Stabilization Foundation each announced the buying and selling prices of the Thai baht against the U.S. dollar. Limit commercial banks' foreign exchange prices.
On November 5, 1984, the Thai baht depreciated by 14.8%, and the official exchange rate was 27.15 baht to 1 U.S. dollar, after which the Thai baht appreciated.
But starting in 1985, Thailand’s economy has grown miraculously. With a jaw-dropping growth rate, it has become the four tigers in Asia. What’s even more incredible is that Thailand’s inflation rate has not been high, indicating that the basic market is very good, and there is a broader market. space.
In order to leave room for the economy to operate when it is exhausted, and to avoid excessive capital speculation, the Bank of Thailand has repeatedly raised interest rates, raising the benchmark interest rate to 6.8%.
The central bank changes the benchmark interest rate generally in order to leave room for economic fluctuations. The increase in interest rates is often because the economy is improving, suppressing inflation and speculation, and leaving room for operation when the economic cycle changes.
It's like a trump card. The higher the interest rate, the better the country's economy is, and the greater the operating space is left. The lower the interest rate, the smaller the operating space. Generally, when the central bank lowers the interest rate to 0, it means that a country has all its cards, no longer has the ability to intervene, and can only surrender its destiny to God.
The Bank of Thailand has continuously raised interest rates, which is nothing.
Thailand has become the four Asian tigers, and the level of economic development is showing signs of catching up with Hong Kong and Singapore. It is the correct operation to raise interest rates to curb inflation and reduce speculative capital flows.
But at the end of 1990, the Thai government established the circulation policy of free trading of Thai baht in the global foreign exchange market, and adopted a fixed exchange rate system to link the Thai baht to the U.S. dollar exchange rate, and implement a pegged fixed exchange rate system to the U.S. dollar. 1 U.S. dollar = 25.29 baht, exchange rate Limited to a floating range of 0.15% to 0.16%.
If all is so, there is no problem.
In 1991, the Japanese stock market plummeted, and the real estate bubble burst, and the Japanese market capital fled.
As the world’s second-largest economic system, the amount of capital deposited in the Japanese market can be imagined. In order to strengthen the absorption of overseas capital, Thailand’s central bank announced in May last year that it would fully deregulate financial controls and stop foreign capital inflows. Intervene.
In addition, the Thai government announced that Thailand has the information to create a fair and free financial center. The financial industry will be fully liberalized in 1993, the establishment of an option financial center in Bangkok will be approved, the restrictions on the establishment of branches of foreign banks in Thailand will be relaxed, and international capital will be allowed to trade in the Bangkok option financial center.
what does this mean?
This means that now that funds flow into Thailand, there will be no more interference.
However, Thailand implements a fixed exchange rate system pegged to the U.S. dollar, but the interest rate is 6.8, while the interest rates of the European Community countries are almost all 2.2%.
Robert John was almost mad with excitement.
"Boss. You mean, we borrow funds from major European banks and then arbitrage in Thailand?"
arbitrage?
Is Lao Tzu such a senseless person?
Holding the phone, Shen Jiannan couldn't help but hooked his mouth.
Although borrowing chickens to lay eggs can also make money, but this little money is nothing.
Counting the time, the Wall Street gang is about to move towards the European Community. At that time, lending them money will be the most interesting.
With a sinister smile, Shen Jiannan praised.
"Old Turnip~EbookFREE.me~ Congratulations, you are right. I will rush over as soon as possible. Now, you need to build the financial company platform as soon as possible."
"..."
Hanging up, Robert John was still excited while holding the phone.
As a banker, he knows very well that risk is always proportional to return. In this world, there has never been an investment that makes a profit without loss.
However, he suddenly discovered that this law seemed to be broken.
Thailand is a country. Behind the major European banks is also a country. Taking the money borrowed from banks here to arbitrage in Thailand, there is no risk at all.
"Praise God. The glory is with me."
"Robert... is that you?"