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* * * Original by Liu Jiaolian * * *
In the autumn of 22 years ago, in September 2001, the famous hedge fund expert George Soros flew to Beijing, China, to participate in an international forum organized by the Society of Foreign Affairs of Renmin University of China. On the 17th, Soros came to Ziguang Pavilion and met Premier Zhu.
During the dialogue, Soros talked to Premier Zhu about Japan’s lessons in financial mistakes. He said, "Japan was once the strongest economy in the world, with rapid economic growth. Although Japan's industry is still strong, its financial system is in a mess. Japan's financial system has lost as much as Japan's industrial output."
Three years ago, in 1998, August 28 was the settlement day of the Hang Seng Index futures contract. Taking advantage of the remaining power of the Asian financial crisis, international hot money is trying to attack the Hong Kong dollar and win again. The Hong Kong government has been engaged in a fierce battle with it for nearly a month, and the settlement day at the end of August will be the final battle. In the end, the two sides fought tooth and nail in the Hong Kong stock market. The trading volume that day reached a record high of HK$79 billion. The Hong Kong government successfully preserved the Hang Seng Index and defended the Hong Kong dollar's linked exchange rate system. One of the elites of international hot money is Soros’s Quantum Fund. It is said that Soros lost US$800 million in the Hong Kong battle. This year, it was Premier Zhu who took office in March who sat at the State Council and watched the war situation.
After three years of fighting each other, they finally met and talked. Soros gave his sincere advice that China's financial industry should strengthen itself first before opening up. He said, "China should first develop its domestic financial market to pave the way for the opening of its financial market to the outside world. The order of opening up is very important. It must be done step by step. First, vigorously promote the opening of the domestic financial market, and then start the opening of the financial market to the outside world. "China should avoid repeating the mistakes (of Japan). China escaped the impact of the Asian financial crisis mainly because China's financial system is closed to the outside world. If it is opened to the outside world, it will face greater risks. Therefore, it should be strengthened first and then opened up. .”
In the next 22 years, in the blink of an eye, the world has changed dramatically. The global financial crisis triggered by the U.S. subprime mortgage crisis in 2008 completely reversed the course of history. The central banks of major sovereign countries in the world, including China, began to reverse their net gold outflows to gold inflows. The following year, in 2009, with almost no one in the world paying attention, an anonymous person named Satoshi Nakamoto launched a new non-sovereign electronic currency-Bitcoin. Another year later, in 2010, China's GDP surpassed Japan's, second only to the United States, and became the world's second largest economic power. In 2017, US President Trump unexpectedly won the election and took office, ushering in the US's global strategic contraction and decoupling from China. In the same year, Bitcoin started its third bull market, reaching a maximum of $19,800, making Wall Street institutions no longer able to ignore its existence. In 2020, a sudden pandemic swept the world, comparable to a world war between man and nature, and fundamentally rewritten human history. Since the beginning of 2020, major events that have never happened in a century have begun to appear one after another, and witnessing history has become a daily routine that people have long been accustomed to: US stocks have experienced record meltdowns one after another, the Federal Reserve has launched unlimited QE, and 1/5 of the total US dollar has been printed in 2020. , Bitcoin hit a record high of $69,000 in 2021. From April 2022 to July 2023, the Federal Reserve raised interest rates 11 times in a row, driving interest rates directly from zero to the highest point in 22 years since 2001...
In August 2023, Ray Dalio, founder of Bridgewater Associates, issued an article stating that China urgently needs to plan and implement a series of elegant deleveraging actions. Because, he quoted the top leader as saying, the current situation is "a major change unseen in a century." “As for debt and the economy, there is clearly a need for a massive debt restructuring of the kind that Premier Zhu engineered in the late 1990s, but on a much larger scale.”
Dalio believes he has seen a debt restructuring of this scale three times in U.S. history. Now, China has reached a point where it needs to deal with the debt problems accumulated over decades of rapid development. The key is how to balance the deflation caused by deleveraging and the inflation caused by easy credit (money). If the balance is good, new credit (money) will smoothly fill the liquidity vacuum left by the old credit that disappeared due to deleveraging, allowing the economy to take on a new look, move lightly, and embark on the road to recovery and prosperity again. . This kind of operation is called "elegant deleveraging" (harmonious deleveraging) by Dalio.
Dalio believes that "China is long overdue for this, so in my opinion, it needs to follow this elegant deleveraging process now because the debt-ridden balance sheet and heavy debt service payments are freezing the economy, especially It's at the provincial level, especially in some of the poorest provinces. At some point, the United States, Europe and Japan may have to do their own deleveraging, and I expect that will follow that process."
Regarding "elegant deleveraging", the popular science short film "How the Economic Machine Works" produced by Bridgewater Associates uses vivid animations and easy-to-understand explanations to explain it in a simple and easy-to-understand way. It is worth watching several times:
Today, we are witnessing the deleveraging (deleveraging) of giant real estate companies and financial giants that were once considered “too big to fail.” And just when we are easing credit and money, the Federal Reserve is raising interest rates without warning, tempting capital to flee. This is clearly a "kill you while you are sick" attitude.
This attitude makes Sister Mu, the founder of American Ark Fund, even unable to stand it. A few days ago, she tweeted one after another that the Fed's interest rate hikes are no longer simply to fight inflation, but to trigger a global deflation outbreak, which is bound to hit China first and then spread to the world.
Financial war, a war without smoke. The Federal Reserve taps a few numbers on the keyboard and in an instant harvests the wealth and wealth of other countries thousands of miles away. "Whatever the industrial output is, the financial sector will lose as much." Soros's profound lesson from Japan 22 years ago still rings in my ears. Thinking about it, I can't help but feel a chill running down my back, from my spine to the back of my head.
* * * Original by Liu Jiaolian * * *
Extra: Liu Jiaolian’s latest article, please click to read:
The public account "Liu Jiaolian Internal Reference" published on 8.22: " Internal reference: Interesting facts about Web3 social popularity; USDC Waterloo; NFT market collapse; Ordinal is still active but analysis of the reasons for plummeting handling fees ."
The public account "Liu Jiao Lian Pro" published on 8.22: " How many BTC do I need to hoard for retirement in 2035?" ".
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(Public account: Liu Jiaolian. Knowledge Planet: The public account replies "Planet")
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