In other words, Chinese Renminbi is flowing to Southeast Asia and the United States.
Once the outflow of RMB exceeds a certain threshold, China will face deflation.
The central bank has always adhered to a prudent economic policy. Even if it needs to deal with the gold rush in Southeast Asia by adjusting bank interest rates and tightening monetary policy, it would still take at least a year through four consecutive adjustments to minimize the losses from deflation.
But now that the Federal Reserve and Soros are acting together in Southeast Asia, they obviously don't have that much time.
International speculative capital and third-party trading institutions have been buying and selling large amounts of gold in the financial markets of Southeast Asian countries in a short period of time, and the gold rush in Southeast Asia has been set off and reached a peak.
In order to find rational measures to deal with the gold rush bubble, the Monetary Council convened a meeting of its staff.
Secretary Meng said, "The Federal Reserve's gold rush in Southeast Asia this time is definitely not for pure purposes. They have not only sold off domestic bonds, loans, real estate, and gold in Southeast Asia, but also in China and Hong Kong."
"I think our government, as the gatekeeper, must adjust policies in a timely manner to balance the supply and demand of money and alleviate economic fluctuations."
What are your thoughts on this?
The committee members looked at each other in bewilderment. The current gold rush had already affected the Chinese stock market, and making a phased adjustment could indeed easily curb economic growth.
"For the past decade, we have faced the threat of inflation, and the government has put the brakes on the economy, shifting the pressure onto exporters and banks."
The deputy governor of the People's Bank of China complained: "The adjustment of monetary policy must adapt to the changes in new structural assets. We can no longer stick to the old economic model."
"Otherwise, it will lead to the other extreme of the free market—an extremely unfree market."
Meng Qing said with great appreciation, "That's what I meant too."
"Faced with new market trends in the domestic economy, when formulating monetary policy, determining policy control targets, and taking macroeconomic control measures, we cannot just apply the brakes; we must also accelerate!"
Upon hearing Meng Qing's words, the expressions of the committee members at the meeting immediately relaxed considerably.
The central bank has tried several times to lower the RMB interest rate to the lowest possible level in order to finance new government projects, but the Ministry of Commerce has always objected.
Because a lower RMB exchange rate is more beneficial to exporters' foreign trade.
They tried to raise interest rates several times, but failed.
"At this stage, I am not worried about the security of the domestic currency. I am only concerned that the gold rush in Southeast Asia may affect our financial market," the vice governor added.
"The Fed's actions in Southeast Asia are clearly aimed at reaping profits from Southeast Asian gold bulls. If domestic retail investors and investment institutions flock to it, they may become someone else's prey."
Meng Qing looked at the vice president and asked, "So, you want to raise interest rates?"
The vice president replied, "Raising bank interest rates and increasing RMB lending rates will increase the borrowing costs and fees for gold speculation, which is equivalent to pouring cold water on the gold rush."
"Then monetary policy was tightened, with policy levers as the core, to drive down the price of gold through inflation."
Currently, the unemployment rate in the United States has reached 8.7%. Inflation and deflation have alternated in the US financial market. The repeated inflation has burdened large and medium-sized enterprises and third-party investment institutions in the US with huge debts.
The United States is constantly printing money and expanding its balance sheet in order to stimulate the domestic real economy and alleviate inflation.
Under the influence of repeated inflation, capital has been leaving the United States in search of more stable land.
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Since most of the money from the Federal Reserve flows into the hands of various financial institutions or corporate banks, these institutions will spill over into Southeast Asia when they invest there.
As a result, the Federal Reserve used this Southeast Asia aid initiative to transfer dollar assets to Southeast Asian countries.
The assets include real estate, corporate equity, and publicly traded stocks, among others.
Secretary Meng said with concern, "Due to the continuous influx of US dollars, although the economies of Southeast Asian countries are booming, their assets have not appreciated."
"On the contrary, dollar assets are appreciating continuously. At this time, because there are so many dollars circulating in Southeast Asia, dollar assets, US Treasury bonds, etc. are also diluted. At the same time, the US reduces its foreign debt."
"The Federal Reserve, through cooperation with local governments, has driven up various assets in Southeast Asia to high levels, and now the economic bubble in Southeast Asia is very serious."
The secretary of the China Banking and Insurance Regulatory Commission added, "However, this elevation is based on the Southeast Asian financial crisis."
"In other words, it's just a mirage, a dreamlike illusion that doesn't actually contribute to economic development; it can only be used to shift the burden of the crisis."
Secretary Meng concluded by saying, "This is just yet another economic bubble created by the Federal Reserve."
“If it’s a bubble, it will eventually burst,” Yi Shu continued.
Yi Shu, the governor of the People's Bank of China, has always opposed arbitrarily changing the RMB interest rate. However, with the Federal Reserve now practically at his doorstep, he has no choice but to be cautious.
"With so many dollar assets flowing into Southeast Asia, if the Federal Reserve withdraws from the Southeast Asian financial market in the future, these dollar assets will be sold off in an opportune moment."
"After making a fortune, the Federal Reserve will quickly withdraw dollar liquidity."
Yi Shu said angrily, "The funds that were harvested from those countries have been withdrawn, the bubble has burst, and we will return to the state of financial crisis."
"The Southeast Asian economic crisis is a foregone conclusion. If we cannot rely on the real economy to revitalize the financial market, then the prosperity of the financial market can only be built on unrealistic imagination."
The gold rush seems to have temporarily revitalized the previously sluggish Southeast Asian economy, but in reality, this prosperity is heavily reliant on the various policies of the Federal Reserve and the support of dollar assets.
The United States has been deeply mired in a crisis of confidence internationally due to its massive money printing in recent times.
"Anyway, I don't believe the Federal Reserve would be so kind as to use domestic assets to aid the Southeast Asian economy," Yi Shu added.
Meng Qing agreed, "You're right. Gold prices in Southeast Asia have already been driven to a peak. I believe that soon, after the Federal Reserve has reaped the profits from the gold bulls, it will quickly withdraw and leave a mess for Southeast Asia."
He thought for a moment and said directly, "Our China's ability to provide a safety net is only enough to save ourselves. As for Southeast Asia, that's up to their own fate."
Meng Qing was extremely disappointed in Southeast Asia. Western countries had cheated Southeast Asia several times, but they never learned their lesson. This time, when the Federal Reserve came to them seeking cooperation, they eagerly followed suit.
This isn't the first or second time; why can't they learn their lesson?
Following this meeting, the central bank introduced a series of policies to address the Federal Reserve's frequent activities in Southeast Asia.
The central bank has always adopted a non-aggressive policy in fiscal and tax reforms and adjustments.
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