"Yes, please continue." Old Lin nodded, signaling Chen Dong to continue.
"Therefore, I believe that we should not simply view it as a currency crisis, but rather go deeper and see it as a new round of economic crisis."
"What makes you think this currency crisis will gradually evolve into a financial crisis? What is your basis for this?" asked the expert, Ma, standing nearby.
"Actually, I've already explained the reasons before. The depreciation of the Thai baht cannot be viewed in a simplistic way. First, Southeast Asian economies are integrated, and many countries have similar financial policies to Thailand, heavily reliant on export-oriented economies. Second, and this is the key point I'm about to make, is that Thailand immediately raised domestic deposit interest rates after the baht's depreciation."
"If this had happened before the devaluation of the Thai baht, it would indeed have been a way to reduce inflation. But don't forget that Thailand's deposit interest rates were already more than double those of Western countries. This one increase in deposit interest rates pushed that level to another level, reaching over 13%."
"The devaluation of the Thai baht will shrink the wealth of Thai people, and the withdrawal of funds from the market will further reduce liquidity. The stock market and real estate market will also collapse accordingly, which will deal a heavy blow to the already poor real economy."
At this point, Chen Dong smiled slightly, "Everyone might as well imagine how much damage the stock market and real estate market would do to the real economy. The collapse of the real economy would cause many people to lose their jobs. That's why I said that if the monetary system is destroyed, it will not only be the monetary system, but will gradually evolve into a financial crisis."
Upon hearing this, Professor Chen replied, "The situation in Thailand is now clear. It is indeed possible that it could develop into a financial crisis, but at present, international speculative capital has no intention of attacking other countries and regions. Isn't it a bit too hasty of you to say that?"
Arbitrary? Not at all.
These events actually happened in another time and space. After attacking Thailand, international speculative capital led by Soros immediately turned its guns on the next target.
In less than two months, Singapore, the Philippines, Malaysia and other countries announced that their currencies would no longer be pegged to the US dollar at a fixed exchange rate, but would instead float freely.
This is essentially a disguised form of devaluation, just presented in a more palatable way.
Because of Chen Dong's involvement, in a sense, he has changed the course of history. These events were originally scheduled to occur in the latter half of 1996, but now they have happened two years earlier.
Of course, because of his involvement, international hedge funds led by Soros did not make a fortune in this currency offensive. This also meant they did not immediately turn their attention to attacking the monetary systems of other Southeast Asian countries.
But one thing Chen Dong was certain of was that what was bound to happen would happen sooner or later, and it wouldn't be long before it did.
"Young Chen, stop hiding things. What else have you discovered?" Old Lin reminded Chen Dong when he fell silent.
Chen Dong chuckled and said, "It's not exactly a discovery. If you look closely, you'll figure it out quickly. As I mentioned earlier, Southeast Asia's financial system is integrated, and the financial environments of several neighboring countries are very similar. They are all export-dependent economies. The Thai baht has depreciated by nearly 20% at the moment. In other words, Thai exports are also 20% cheaper than before. It's a mutually reinforcing relationship."
"From the perspective of ordinary people, if the same product is discounted by 20%, would you choose the discounted product or buy it at the original price? In addition, the Thai government's measures to raise deposit interest rates in order to save the Thai economy will gradually show their harm in the next few months to a year."
"The Thai baht's depreciation against the US dollar will continue to decline under such policies, and it is very likely that the depreciation will exceed 30%. This would be a fatal blow to other export-oriented financial systems."
"If we take an extreme approach, in order to retain the dollar capital that is constantly flowing out of the country, we might choose to devalue our currency, just like Thailand, in order to improve the competitiveness of our exports."
Old Lin asked, "Everyone, what do you think of what young Chen just said? Will it turn out as he said?"
"Professor Lin, we cannot rule out this possibility." After a moment, the professor from Peking University nodded and said earnestly.
"And you two?" Professor Lin asked, turning to the other two professors again.
"We think similarly to Professor Wang. We do not rule out this possibility, but this possibility is based on the premise that the Thai baht continues to depreciate and affects the exports of neighboring countries. In addition, choosing this solution does not constitute a financial crisis. To call it a financial crisis would be an exaggeration."
Professor Chen and Professor Ma shared the same view, both believing that Chen Dong's opinion was somewhat too radical.
"Young Chen, tell me your opinion again." Old Lin began calling on people.
Upon hearing this, Chen Dong said, "It's not that the possibility is small, it's a fact. We can't just look at the issue from a financial perspective; we also need to consider its political impact on the surrounding areas, as well as the external financial and political environment."
"Leaving aside these financial factors and looking only at the external environment, the economies of Europe and the United States have been sluggish for the past few years, and the US interest rate hike cycle has also destined the return of the US dollar and the withdrawal of funds from all over the world. Whose funds are being withdrawn? They are the emerging markets where US dollar funds flowed in a large amount a few years ago, such as Singapore, Malaysia, Thailand and other Southeast Asian countries and regions."
"Therefore, from an external perspective, these countries' capital pools will desperately flow outwards, and clinging to the fixed exchange rate of the US dollar will increase their costs and drag down their economies. Under these conditions of internal and external troubles, do you think those international speculative capitals will let go of such a good opportunity to kick a dog when it's down?"
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