Why is it that a hike in the US dollar will lead to the collapse of the economy of many countries?
This has to start with the long period of interest rate cuts that the United States has maintained.
The impact of the US interest rate hike on the stock market and the property market
In the past, we always said that the United States is a big consumer country, the so-called big consumer country, in fact, it does not mean that Americans only know how to buy soap, towels, eat and drink, in most cases, as long as the United States is in the interest rate reduction cycle, easy to borrow, Americans will run to the bank to take loans, and then bring this money to developing countries to invest in factories, real estate, or stocks.
With the investment of overseas funds, factories in developing countries have become prosperous, factories have benefits, economic benefits are good, and workers also make money, so everyone has some investment ideas, such as investing in real estate and investing in the stock market.
As soon as hot money enters, the upward cycle of these investment areas is opened, and the more it rises, the more it will attract more people to borrow more money from banks to invest, which further promotes the rise in house prices.
That is to say, as long as the United States cuts interest rates, Americans will increase loans to engage in investment, and once these hot money enter the stock market and property market of developing countries, developing countries will be thriving.
However, if it rises to a peak and the United States suddenly proposes to raise interest rates, those Americans who take loans and run to developing countries to invest will withdraw the dollar to the United States, cash out at a high level, and bring 1 million when they go back, but take away 1.5 million, or maybe even more. If the withdrawal of foreign capital is too large, it may also trigger a panic sell-off, leading to a financial crisis.
In fact, there are several countries that have caused financial crises for this reason, let's briefly talk about the history of Vietnam: since 2005, foreign investment has suddenly increased in Vietnam, and by 2007, in just three years, the total investment volume was as high as 20.3 billion US dollars.
The result of a large amount of money entering Vietnam is that it has pushed up the property market and the stock market, and by the way, it has also brought Vietnamese people into the stock market and the property market for investment. Later, as soon as foreign capital withdrew, the Ho Chi Minh Index fell by nearly 2/3 in just 8 months.
As a result, it goes without saying that when the stock market and the property market were booming, everyone ran to buy and ignored the entity, and then as soon as foreign capital left, the bubble burst, and the economy followed the crisis.
Of course, after foreign capital has made a wave, it is likely that it will patronize again, but it will wait until the country's property market and other assets have fallen to the end, and they will take the dollar again, so that the next expansion cycle of the dollar has begun again.
The impact of the dollar hike on developing countries
Why is this happening?
The main thing is that people need dollars too much!
There is a saying circulating on the Internet:
The current situation of global manufacturing: the goods on the shelves are Chinese, the equipment in the factory is German, and the equipment in the laboratory is American
Over the years, our Manufacturing Industry in China has developed better and better, almost everything can be manufactured, but the fly in the ointment is that industrial lathes and equipment still have to rely on Germany, we can now achieve the production of 90% of the low-end lathes, 60% of the mid-range, but the processing accuracy of this piece is still a little worse, so the high-end self-sufficiency rate is less than 10%, 90% still need to rely on imports.
This thing can only be imported, which is more troublesome. In the past, when bartering, you wanted 10 billion pieces of equipment, I wanted 10 billion parts, and the goods were exchanged, and the transaction landed.
But later, lathe equipment was imported from Germany and Japan, and they only charged US dollars, and barter was impossible. For example, drilling oil and mining equipment, this thing is mainly Germany, the United States only have, without this thing there is no way to dig oil, but these two only collect dollars, so there is no way, we can only maintain a certain foreign exchange reserves.
In the past, when we had insufficient reserves, most of us exchanged domestic oil and rare earths for dollars and then promoted transactions.
Today, this situation is very rare, after all, we have reserved 3 trillion yuan of foreign exchange in these years. However, this has not changed much in other countries.
Therefore, for these countries with insufficient foreign exchange reserves, the entry of foreign capital means that they can more easily buy high-end technology products and equipment from the United States and Germany.
Some people say that if you don't buy it after the big deal, you don't need to engage in any foreign exchange reserves. The point is, if the mining equipment fails and is not replaced in time, or is not maintained in time, then how to drill the oil well, where does the oil come from? The next series of domino effects we will not say more.
Therefore, for such a country, once foreign capital is withdrawn, it is not only the stock market that will attack, but also high-end manufacturing.
The impact of U.S. rate hikes on developers in developing countries
After the US interest rate cut, those capitalists have already talked about a lot of loan investment, and we will talk about the impact of foreign capital withdrawal on developers.
Every time the dollar is released, the capitalists in the United States get the money and start to be busy in the third world, mainly because there are basically no investment opportunities in the United States. In addition to buying and selling stocks and houses, and investing in factories, they also lend money to real estate companies in their countries to earn interest margins.
These companies could not borrow money because they wanted to borrow money, so they could only borrow money from the second-tier dealers. The process of borrowing money in this situation is also very simple, they first borrow dollars from foreign institutions, and then go to our central mother to exchange it for yuan, and then use this money to buy land, buy cement to build houses, and pay employees wages...
But the problem is that if this intermediate link is not smooth enough, for example, the building that was originally planned to be sold out in March is not sold out, and the high interest at the end of March will be difficult to connect. What to do? Continue to borrow and pay back the old with the new. But this thing can not be played forever, if the scale is getting bigger and bigger, the debt is more and more, the United States does not raise interest rates, these US debt does not have to be returned at once, everyone makes money fine.
However, if the United States raises interest rates, or the debt matures, and the US capital does not intend to renew the loan, then repaying the money becomes a headache. Don't look at these big business guys, they are worth billions, but they are all assets and nominal money.
When you are in a hurry to repay the money, why don't you have any money? Can only borrow!
Borrow the US dollar first, and if you can't borrow it, you will borrow the local currency in the country to exchange for the US dollar, but if there are many people who borrow, what will the result be? This requires more local currency to buy dollars, and to put it bluntly, it pushes the dollar exchange rate upwards.
Don't understand?
Well, if you treat the dollar as a commodity, if you want to buy, I want to buy, everyone has to buy, the demand for dollars is greater, the price of dollars will rise.
Of course, if you can't borrow, there is another choice in the end, that is, ——— "storm" and "thunder"
Needless to say, the results of the thunderstorm are linked to the production links of any country, which means that it involves all walks of life and all fields. Therefore, panic can be called its twin brother, once the big enterprises because of debt defaults and thunderstorms, a large number of enterprises will follow the bad luck.
Now that the field has been discussed, let's talk about the big framework
In any country, the domestic circulation is generally based on local currency, for example, we, the market circulation is the renminbi.
If the United States raises interest rates and foreign capital flows back, the local currency will be reduced accordingly.
By the way, why is the withdrawal of foreign capital, and the local currency will be reduced accordingly? To put it simply, when foreign capital withdraws, it is necessary to first exchange the RMB in your hand for the same foreign currency at the central mother. After the central mother pays the foreign currency, she gets the same amount of local currency, which is equivalent to the central mother recovering the worthy coins on the market, so that the number of local currencies on the market is reduced.
The local currency is less, if you want to take out a loan, you need to use money urgently, or the business owner needs funds to solve the problem, then the loan is difficult. And the enterprises and enterprises are trade interconnection, interconnection, a capital chain is broken, which means that enterprises with direct or indirect ties to this will be affected.
That is to say, once the dollar raises interest rates and shrinks the balance sheet, for those developing countries with insufficient foreign exchange reserves, the development path will be interrupted by him.
The terrible thing is that some domestic bigwigs with capital and brains saw the crisis and also followed the withdrawal of selling houses for dollars, and then the economy was hit hard, and the crisis came.
In general, the dollar raises interest rates, and in response to the crisis, developing countries will raise interest rates together, but the result of this will make it more difficult for enterprises and capital markets to survive. However, if interest rates are cut, foreign capital will withdraw faster.
So why as soon as the dollar raises interest rates, many countries are afraid, see this, you probably understand, right?
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