Vol 4 Chapter 18: Finnish bastard

Interest spread, as the name suggests, is the difference in interest rates.
In economic regulation, interest rates are often adjusted according to the economic level of the currency-issuing country and inflation expectations, resulting in regional interest rate differences.
This difference is nothing new for professional financial practitioners. Many professional financial practitioners conduct cross-regional arbitrage investments based on risks and returns, considering the relevant factors of exchange rates.
Those who meet are not difficult, those who are difficult will not.
So how to convert a currency with a low interest rate into a currency with a high interest rate, so as to earn this spread?
Assuming that the one-year pound deposit interest rate is 5.5%, the dollar deposit interest rate in the same period is 5%, and the interest rate difference between them is 0.5%. Assuming that the current exchange rate between them is 1 pound and 1.5 dollars, if the exchange rate fluctuation is not taken into account, the sum of the principal and interest of a one-year deposit of 1,500 dollars is 1,575 dollars, which is converted into 1,050 pounds in British pounds.
But if the US$1,500 is converted into £1,000, the sum of the principal and interest of the previous year will be £1,055. In short, for the same amount of deposit, depositing GBP is 0.5% more interest spread than depositing USD.
Of course, this can only be achieved when the exchange rate remains unchanged.
In other words, if the one-year deposit period expires and the exchange rate fluctuation between them is 1 pound and 1.48 dollars, the sum of the principal and interest of 1055 pounds deposited in pound sterling is converted into U.S. dollars, which is 1561.4 dollars, which is 13.6 less than that in dollar deposits. The dollar, this is because the exchange rate difference between the British pound and the U.S. dollar reached 1.33% in one year.
So when this exchange rate difference is greater than the interest rate difference, arbitrage trading is not worth the gain.
Then, the problem came.
The Finnish mark implements a pegged exchange rate system, which is mainly pegged to the Ecu of the European Community. However, since Ecu’s proportion is centered on the German mark, it is equivalent to the Finnish mark to the German mark.
What is a pegged exchange rate system?
In a pegged exchange rate system, a country’s currency maintains a relatively stable price ratio with another or a basket of currencies, that is, pegs to the selected currency. The national currency fluctuates with the fluctuation of the selected currency, but the mutual price ratio is relatively fixed or only fluctuates in a small range, generally not exceeding 1%. If the market exchange rate fluctuates beyond this range, the central bank will intervene in the market. Stabilize the market exchange rate and maintain the effectiveness of the pegged exchange rate system.
In the eyes of professional financial practitioners, arbitrage trading investment is one of the most common trading investments, which is like eating and drinking water. There is nothing strange. But for people other than professional financial practitioners, many people do not understand what spreads are, or in other words, how they affect individuals.
Like a lumberjack, he can feel the growth rings of a tree with his hands, but he doesn't know how to make a generator. A technician who makes generators can make generators, but he doesn't know how to save costs in mining.
But what if someone leaks the secrets of the industry or the ways to make money?
London, England.
Jari Litmanen wears a white hat and a chef's uniform, leaning against the kitchen with a newspaper and looking at it.
The Sun, the UK’s most-selling newspaper, can sell nearly three million copies a day.
However, although the sales and popularity of The Sun is very high, many people have a bad impression of The Sun, especially the intellectuals. Intellectuals criticized the "Sun" for its crude, unprofessional, and non-neutral way of reporting news, and often used sensational methods to stimulate sales. The target readers are basically people with limited educational backgrounds and meet people's low-level needs.
Critics of "The Sun" mainly focus on the vulgar, sensational content and unprofessional writing methods in the newspaper, as well as the political stance that favors Murdoch. They have also repeatedly joked about the heads of state and major events in the UK and abroad. .
For example, at the end of the Falkland War, the Argentine warship general Belgrano
General Belgrano was sunk, and the newspaper wrote the headline "Hit!".
Nevertheless, there are surveys that among the aBc1 senior readers, the number of readers of The Sun is twice as high as that of the knowledge-based and senior newspaper of the same group, The Times.
the reason?
Okay... Since 1970, "The Sun" has launched the famous "Three-Edition Girl". The third-page girl was originally a portrait of a famous model, but the format changed to appear every day.
The figure is slender and shadowy, and it is imaginative. The beautiful body and curvy figure will always make people never tire of it.
Of course, such newspapers are only secretly read by the intellectuals, and not openly out of the ordinary. Only low-level people like Jari Litmanen can watch it in the kitchen with a newspaper.
Jari Litmanen is a small person, of course, he doesn't think so.
Last year, he was still a bakery owner in Finland, but with the weakening of the Finnish economy and the Finnish population is still too small, Jari Litmanen had to move the bakery to London to seek better development.
Jari Litmanen was lucky. Soon after the new bakery opened, he went on the right track. He can make a net profit of nearly two thousand pounds a month. He is also a man who cares for his family, although he occasionally reads some pornographic magazines or goes to Take care of the women who stumbled on the street, but still send the money back to the Finnish home on time.
There, his wife lives with the children.
Holding the newspaper in his hand, Jari Litmanen lit a cigarette, and in the smoke, he first flipped the front page of the newspaper.
Jari Litmanen has a habit and always likes to put delicious things behind, so although he bought "The Sun" for the purpose of watching three girls, he would still read other news first.
Front page, headline.
A picture of a Chinese man is impressively listed.
Jari Litmanen became interested. In Europe, Chinese people are as rare as pandas. Suddenly, Chinese people appeared on the front page of The Sun, which made him feel very interesting.
Be wary of the devaluation crisis of the Finnish Mark.
Author: Chen Jiannan.
"Economy is a way of exchanging wealth. Hundreds of years of economic markets have shown that there will always be ups and downs in economic operations, which we call economic cycles.
Statistics from the Finnish Labor Department: In the second quarter, the national unemployment rate increased by 5% to 15%. "
"..."
"The Central Bank of Finland has decided to lower the benchmark interest rate by 0.5%."

Not long ago, the Bundesbank raised the benchmark interest rate. The central bank’s executive interest rate reached 5.6 percent, and the commercial bank interest rate even reached 6.3. This is very attractive for Finnish value-preserving capital.
"..."
"The nature of capital is to pursue profit. Finland's 1.5% interest rate cannot even beat inflation. It loses its appeal to capital. If you bring Finnmark to a German bank, you will get more benefits. "
"..."
"We don't want to see Finland fall into a currency crisis because of the economic crisis."
"..."
"But we have to remind the Central Bank of Finland that we now need to see the reality clearly to avoid a bigger crisis."
"..."
The big headline made Jari Litmanen's lazy attitude instantly freeze. He is a Finn, and all the money he makes is sent home and stored in Finland.
Your own money should depreciate, UU reading www. Even if uukanshu.com does not depreciate, depositing money from Finland in a German bank can get nearly 4% more income.
As if he had started, Jari Litmanen almost didn't slap himself in the face. He hadn't expected that he would lose a lot of interest in Finland in a year.
Without any hesitation, Jari Litmanen ignored the three-point girl, dropped his cigarette butt, picked up the phone and dialed back to his home in Finland.
Soon, the phone was connected, and a voice familiar to his wife came from the phone.
"Minnie, it's me. Are you asleep?"
"Oh, oh...not yet. What's wrong."
"Tomorrow you take our deposit to the bank and exchange it for Deutsche Mark. We deposit the money in a German bank, so that we can earn four points of interest every year..."
"..."