How is the exchange rate formed?
Recently one of the hottest topics, undoubtedly the RMB exchange rate has been falling this matter, so let’s discuss this first question, How is the exchange rate formed? A country can produce other countries can not produce things, and these things are needed by others, then its currency is inevitably in demand, Everyone wants to use their own hands of currency, and their currency exchange rate is naturally low, in turn, a country can only planting can only produce some, who can produce agricultural products, other people naturally do not have a reason, many holdings of your currency, that your currency exchange rate is not high.
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The reality of the exchange rate is mainly a transaction. For example, the Chinese need dollars to buy oil and chips. Then you have to go to the bank with the yuan to change, It happens that other countries also require the yuan to buy, our things, then you need to take the dollar to the bank to change the yuan, so back and forth a transaction with the price of eggs, which formed a transaction price, that is, the exchange rate, if a certain country produces something very good. Everyone needs it, then the country’s currency will naturally be more sought after, and the exchange rate will rise.
On the other hand, in a country with poor resources and social unrest, we do not buy these things, but also will not go to them to travel, Naturally, almost no one needs their currency, such as in Afghanistan the exchange rate naturally impossible to go up, there are also a number of small countries, they may simply do not even have a currency, direct use of the U.S. dollar.
Why is the US dollar so strong?
From the Hong Kong area, the currency is not the dollar but belongs to the dollar coupons, The Hong Kong dollar printed on the voucher that is said to be the ticket, in fact, is the dollar coupon, can be changed into dollars at any time, understand this, you understand why the U.S. currency so strong, because on the one hand, the world needs to buy U.S. products, but also require the dollar to buy the products of the Arabian is oil, on the other hand, the rich people have to save a few used to hedge, although not less printed, but compared with other currencies are still very good.
Because the dollar circulation is too good, everyone can always spend out, but also can always be converted into U.S. debt to invest in U.S. debt, can always be converted into U.S. dollars to spend everywhere, while other currencies can not meet these characteristics at the same time, some can not be free-flowing, there is no huge investment market.
The impact of interest rate hikes on exchange rates
However, most of the currency of the world’s rich people do not recognize the problem of the rest of the world, that is to say, that you do not have the means to get to a place at random You can spend it at any time. However, the overall impact on a country’s exchange rate is still the biggest productivity, Our currency has not less issued, but the productivity, the enhancement is more obvious, which led to the exchange rate rising very much.
The next question is why the dollar has been so strong these two years.
This question is why the dollar interest rate hike will be the collapse of many countries. The dollar in order to cope with high inflation in the past two years, has been raising interest rates, he raised interest rates, you put money in the United States, the interest rate will be higher than in the home country, many people want to change the money in their hands to the dollar to save money to the United States, the dollar to the United States after where to go?
Some dollars originally from the U.S. bank were loaned out, and now back, The money was also created out of thin air credit, back to the bank disappeared, there is a part of the dollar was treated as a deposit in the U.S. bank to eat the interest, there is a part of the U.S. treasury bonds to buy, as for The Internet said that these dollars back to the U.S. investment in the U.S. after the United States is virtually impossible, the reason for which we will say later! The reason for this is that we will talk about it later.
The risk of high interest rates in developing countries
This also explains why the world’s currencies are depreciating against the dollar, because the world’s rich people in various countries, all the national currency into dollars to the United States to eat the interest, we are all robbing the dollar to throw the national currency, then who VAT depreciation is not at a glance?
U.S. Treasury bond yields have now reached 4% This time we look at nothing, If ordinary people, put their own 100,000 deposits saved in a year, but also 4,000, and can not really improve their lives, for the rich with large funds, this rate is high scary, they usually buy such high-interest rates on financial products, that is the need to risk the principal times lost!
The risk, but the existence of U.S. banks or buying U.S. bonds, that is risk-free. Here, there is a very key question, generally speaking, the interest rate of developing countries than developed countries, because developing countries have risk, now the most developed countries’ interest rates than developing countries are high, that is not a lot of money to the United States to go it.
The impact of interest rate hikes on companies and the housing market
If specifically, for example, I am a foreign trader, earned 1 million U.S. dollars, 50 million of them into the yuan to the workers paid wages, the remaining 500,000 yuan into the yuan or investment or consumption or simply exist in the bank, now the dollar interest rate hike, I will transfer the 500,000 to the U.S. bank to eat interest, that is to say, this money is still the Chinese bosses, and does not belong to the U.S. government, but if I can take this money naturalized in the United States, then the money did become a U.S. asset, but the Chinese side because of the withdrawal of a large amount of money, may lead to the stock market and the housing market together down.
In fact, we have seen, these two years that China’s stock market and the housing market are not good, that the U.S. outside the country what way to curb the momentum of this it is, how simple ah, interest rate hikes ah. His interest rate of 4%, your interest rate of 8%, rich people naturally do not go, of course, not necessarily, the nature of interest is the time cost of money. There is risk, risk discounting this matter, sounds not very understandable, In fact, you think loan sharks know, that interest is so high because loan sharks are generally nothing good, but also prevent him from not paying it back, Afghanistan, Syria, such as the country’s interest rate is too high, dare to go to invest in the people will not be too much, because the risk is too high, the interest is hedged against, but here there is a big problem, everyone!
The dilemma of protecting the housing market or exchange rate
Should know that enterprises are now operating in debt, your boss paying your salary is basically impossible to the company’s own funds, but from bank loans, and may even buy goods to buy machinery are loans. Banks raise interest rates, for your company for no reason out of an additional expenditure, which may lead to the company not being maintained, so every time a large-scale interest rate hike falls a bunch of companies, which is why the general countries can not raise interest rates on the reasons.
China’s side, there is a more troublesome thing, Whether it is real estate enterprises or the final purchase of homes the people need a lot of loans, If the country orders to prevent foreign exchange flight, the interest rate pulls up, but that real estate enterprises closed down faster, everywhere rotten buildings, the people are also too high because of the interest rate of the loan, simply do not buy a house, further impact on the real estate, so not only can not raise interest rates, may have to lower interest rates, which also led to foreign exchange Further outflow, the exchange rate further decline.
This is also the jianghu that has been circulating the origin of that sentence, In the end is to protect the housing market, or to protect the exchange rate because if the exchange rate is, that will have to pull high-interest rates, house prices will be in trouble, if you want to protect the house price that will have to cut interest rates, may lead to the further outflow of foreign exchange, the exchange rate further decline.
The indiscriminate effects of interest rate hikes on US companies
So the United States’ to raise interest rates for a lot of countries have appeared to be a dilemma, you do not follow the Hike it, your country’s foreign exchange has been in the clamor to the outflow, many companies for many years to engage in exports to earn money, just so plainly run away, the exchange rate will always be low, but if you follow the hike it, your domestic enterprises ah, the pressure will skyrocket every hike a bunch of deaths, but also with the avalanche of real estate, speaking of which, we must have a doubt in mind, that the United States people hike their own interest rates will not be Their own companies to death.
Of course, the interest rate hike brought about by the rising cost of money is an indiscriminate massacre, the first step affected by the United States itself, which is why the United States interest rate hike in the United States this matter is also windy, Every time a hike in interest rates, U.S. stocks at once blood flow into the river, of course, our side of the probability of arrangements on the U.S. dollar interest rate hike has been very radical, but far from the most radical.
The radical history of interest rate hikes in the US and Japan
In the 80s, in order to solve the high inflation, the then Federal Reserve Chairman Paul Walker breath hiked interest rates to 19.1%, with Russia’s wartime interest rates now, the U.S. companies with the grasshoppers in the late fall as much as the batches of the fall, Walker himself also several times by the personal threat, if he wants to raise interest rates again, then get him killed, of course, Paul Walker’s decisiveness has become an eternal legend, is considered to have saved the United States. Later burst the Japanese real estate bubble, Heisei ghost genius Mie Nokon also very quickly pulled up the interest rate, and then the Japanese real estate bubble collapsed.
Many people ask why is he so impulsive. Because he is learning from Paul Walker. From here can also be seen very high interest rates will lead to a real estate crash, but the United States has a technological revolution, Japan does not, so the same means, Japan but depressed to the present, while the United States then rides on the fast car of the computer and the Internet revolution to continue to rave.
However, now the Federal Reserve, if the interest rate hike will generally put out the wind in advance, so that everyone is psychologically prepared, for example, if you are entangled in the loan of a large sum of money, then now know that the Federal Reserve will have to raise interest rates, that may not be a loan, perhaps in the future to avoid you from closing down the bankruptcy.
The Federal Reserve’s approach to interest rate hikes
Since entering the interest rate hike cycle, U.S. companies have also been cut off like wheat, and those that didn’t die are having a lot of trouble operating. You should have heard about it, some time ago, and the United States is still talking about it, the lowest unemployment rate in history, This period of time does not mention much, because the company closed down after the unemployment rate of the unemployed more people, the unemployment rate of this matter, there is nothing to mention.
Not only that, the U.S. stock market is also the U.S. loan support, and now the interest rate hike shrinkage, the loan has become less and more expensive, and treasury bonds and whatnot, the interest rate is very high, investors are not investing in the U.S. stock, all run to invest in U.S. debt, the results of this U.S. stock also fell like a dog.
Then the next question comes, currency devaluation for us, in the end, is not a good thing? In a word, not a good thing, but also not bad anywhere. First, after the devaluation of the currency, imports are expensive, Our main imports of energy are soybeans steel raw materials’ chips, and whatnot, Soybeans are used to extract oil and feed pigs, If the price of soybeans rises, which may lead to higher prices of meat, energy and raw materials are expensive, that will certainly raise the price of daily necessities, which is why some time ago the Development and Reform Commission issued a special price increase, the notice may be small partners did not notice that I posted for everyone, the State Council Information Office issued the National Development and Reform Commission said that the latter months of this year to the first quarter of next year, the domestic price level may be slightly higher than the first few months.
Some of the same reasoning, the cost of China’s manufacturing industry will also rise, If you are an export processing boss, your company’s order price rise, export prices can not rise, earn less certainly, earn less, in fact, nothing, as long as the earnings are positive on the line, then you do not have to go out of business.
The most important thing in the interest rate hike cycle, is not to close down, if the cost is too high, may layoffs or reduce wages to employees, in general, then, Internet companies like to keep the head of the geniuses, and in the manufacturing industry, everyone contributes not too much, the general tendency is to reduce wages.
But there is a good thing, since the devaluation of the yuan, our products are not cheap, so exports should be good, right? But we should not forget the dollar interest rate hike, resulting in the world’s currency being less, the world’s people being short of money, and the desire to spend that less, as if the shopping mall prices, but you happen to be short of money recently, there is little desire to consume the same.
China’s import and export can be seen, this year has been rising, but overall than last year. Can be understood that the depreciation of the yuan is conducive to exports, but the global purchasing power as a whole is deteriorating, Of course, but also with the resumption of foreign production after the resumption of work has to do with the resumption of production, that said, there may be a small partner to ask, the blogger to hear you say so, as if it is not particularly serious, why is he so much attention to this matter for the country?
In fact, ten percent of the appreciation or depreciation of the problem is not too big, but now there is a problem is so big fluctuations, we can not do business. So the country has to do its best to stabilize the exchange rate, if there is any big trouble, that is, the dollar debt, this period of time we should have heard of a lot of domestic enterprises defaulting on the dollar debt, right?
For example, a few days ago, a real estate company, he is now facing the risk of default, saw this kind of news, a group will be on a nine-dollar debt to seek to roll over, the first repayment of 5% of the principal, Why is this thing so troublesome? For example, if you borrowed 1 billion last year, the dollar debt, would have paid 6.5 billion yuan can be resolved, and now the exchange rate fell may have to pay 7.2 billion, all of a sudden for no reason to pay more than ten percent, you do not forget, this is not counting the interest it, for many companies, a year’s head of the profit is only ten percent, all to go to this part of the extra, some repayment is not possible, maybe simply directly bankruptcy, so this time you pay attention to a lot of dollar bonds, many of them are not the same.
So this period of time we pay attention to, a lot of U.S. dollar debt can not be paid, on the verge of bankruptcy, small companies are bankrupt even if, those giants, owe a bunch of suppliers of money, he is going to die, maybe his suppliers have to die a number of people, and then a lot of people have to lose their jobs, and there may be rotten buildings.
That’s why every time the US dollar raises interest rates, the whole world jumps out of its skin, so there’s nothing we can do about it.
The bad news is that this state of affairs really does not do much means, not only means of China. The world is not much, can only let the U.S. toss, let the dollar be the world’s currency, The good news is the interest rate hike is a double-tough sword for developing countries to cut the meat, for the U.S. is also scraping the bone, they are also pain. So quite to the first half of next year, the holidays will be over, begin to reduce interest rates, by then the money will be back, and can be around the development.
Continued outflow of foreign exchange will lead to the continued depreciation of the yuan, by then there will be sustained input inflation, but China belongs to the large industrial countries and industrial powerhouses, Industrial goods are sufficient, usually, but they should not be too serious, in addition to the continued outflow of foreign exchange, the stock market and housing market is generally not too good, and those who signed numerous U.S. dollar debt business will be very painful.
RMB devaluation is good for exports, but it will not be too good, because the foreign people have become poor, they can not afford to spend money, and finally, the dollar interest rate hike thing, history proves that it will never continue, wpcdoorsupplier.com company predicted that next year the probability of the end of the short term can only be affected by the U.S., and the long term to see everything is the advanced productive forces say. As long as we keep stabilizing growth and promoting development, slowly we can get rid of this trouble.
To form a strong alliance, it is crucial to have a symbiotic relationship built on mutual assistance and reciprocity. This will enable WPC door suppliers to effectively address any challenges that may arise, including the United States of America’s frequent interest rate hikes and protectionist policies.
