The Son of Finance of the Great Age Chapter 217

  Chapter 217 Ponzi scheme

Originally, Zhong Yi's first reaction was that Zhong Shi was using his own funds, especially Tianyu Fund's funds, but after repeating the so-called capital transfer several times, he realized that the funds invested in the Russian bond market are absolutely It will not be Zhongshi's own funds.

  Since it will not be its own funds, it is very likely that Zhong Shi will use its own funds for borrowing, which naturally has to consider the issue of interest rates. In today's world, which currency has the lowest interest rate, the truth of the so-called "capital transfer" is about to come out.

  The reason why Zhong Yi hesitated for a moment was because he immediately thought of another problem, that is, the exchange rate problem. Because this part of the funds invested in Russian bonds must be U.S. dollar capital, and Zhong Shi's borrowing funds with his own funds will definitely not be U.S. dollars, because he holds U.S. dollars in his hand, and there is no need to do anything extra. Since it is another currency, it is necessary to consider the exchange rate issue.

But when he thought of the yield rate of Russian government bonds, Zhong Yi suddenly realized, because at this time Russia's inflation was extremely severe, and even bonds denominated in US dollars usually had a coupon rate of more than 30%, and these were only half-yearly. The interest rate on short-term bonds.

  Compared with this interest rate, it is inevitable to seek a currency that does not fluctuate too much and has a lower interest rate. In this case, the yen is naturally the first choice for borrowing.

  After 91 years of bubble economy, Japan implemented three different policies to stimulate the sluggish economy, including starting a large-scale infrastructure construction, implementing extremely loose monetary policy and direct foreign investment. Among them, the interest rate of the yen was reduced to the level of 0.5% for one year in 1996, which is equivalent to lending for nothing.

As for the exchange rate of the yen, after the Japan-U.S. trade negotiations were reached in 1995, the yen, which has been rising continuously, has also begun to fall gradually, from the highest point of 80:1 to the level of 100:1, and stabilized at floating within a certain range.

Under such circumstances, it has become the most popular investment method among hedge funds to borrow Japanese yen at a loan rate that is almost free, then convert it into US dollars in the foreign exchange market, and then invest in the Russian government bond market with a very high return rate. . Compared with the annual rate of return, which is as high as 30% or even 50%, the exchange rate fluctuation of the yen to the dollar is nothing at all.

   "Yen, right?" After all, he studies macroeconomics. After thinking about it for a while and taking into account almost all the influencing factors, Zhong Yi gave his own answer.

   "Not bad!" Zhong Shi nodded approvingly, and continued with some emotion, "Speaking of which, I really want to thank the opening of Russia's capital account, otherwise we would not have such a good investment opportunity."

  In 1996, with the so-called "shock therapy", Russia also opened its own capital market in a timely manner. While foreign investors have direct access to the Russian market, few are willing to hold rubles due to mounting inflation and closed capital accounts. Under such circumstances, the Russian government launched national bonds denominated in US dollars to absorb foreign capital investment.

  Russia at this time, even people in the government authorities, are unwilling to settle their salaries in rubles, because this means that the salaries they get will soon depreciate. You must know that since 1991, the ruble has depreciated by about 50% every year, and even reached 100% in some exaggerated years. Although it has not yet reached the point where burning charcoal is not as good as burning banknotes, this kind of hyperinflation is in modern society. Already very rare.

"Yeah, such a high rate of return is simply unbelievable." Zhong Yi also sighed, and then remembered something, and asked puzzledly: "According to such a high rate of return, isn't Russia's national debt very risky?" ?”

  An annualized rate of return of 30%-50% is an extremely high level of return for any financial market and any financial product, and it is difficult for most hedge funds to achieve such a rate of return.

  As the saying goes, the greater the risk, the greater the reward. Since the rate of return is so high, the risks inherent in it are naturally very high. There is no such thing as a white pie in the sky, and this truth is very clear to Zhong Yi.

   But for risk-loving, even extreme risk-loving hedge funds, this is the place for them to flex their muscles. What? Risk averse? Then just buy U.S. Treasury bonds, the yield is only the benchmark interest rate, and there is almost no risk at all.

"Yes! The risk is very high! There is a possibility of default at any time!" Zhong Shi stroked his smooth chin and kept nodding, obviously agreeing with Zhong Yi's point of view, "In my opinion, the Russian national debt is a Ponzi scam!"

  "Ponzi scheme?" Zhong Yi was taken aback for a moment, and then a thoughtful look appeared on his face, "It can't be so serious, at least it is guaranteed by a country's credit, so it shouldn't be easy to breach the contract."

  The Ponzi scheme they are talking about is an extremely famous scam in the financial field, because it was "invented" by a person named Charles Ponzi, so it is also called a Ponzi scheme in Southeast Asia.

  In fact, the principle of this scam is very simple, that is, first use a grand investment target as a bait to attract investors to raise funds, promising high profit returns. Since this investment plan does not exist, there is no return, and the investor's profit is paid from the principal of the next batch of investors. When the first batch of investors saw the high profit returns, this investment model and word of mouth spread like wildfire, and the effect of this was that more investors invested their money in this non-existent investment goal.

  Ponzi scheme, in the Chinese idiom, is a typical "tear down the east wall to make up for the west wall", or it can be said to be "the white wolf with empty gloves".

  This kind of scam needs a steady stream of capital investment to continue. Once the capital chain is broken, the scam will immediately show its original shape. The "Madoff scam" of later generations is a typical Ponzi scheme, and the people deceived even include many celebrities on Wall Street, and even people who are top bankers themselves.

  Naturally, the issuance of Russian government bonds is to raise financial funds, and its essence is not the same as the Ponzi scheme, but it is very likely that the operating principle is already somewhat similar. In the sluggish domestic economy of Russia, its financial revenue may not be able to support the issuance of such high-interest bonds for a long time. In this case, it is inevitable to use newly issued bonds to repay the principal and interest of old bonds. .

  If such a vicious circle continues, one day it will evolve into such a situation, that is, the funds raised by the newly issued bonds are not enough to repay the principal and interest of the old bonds, so the interest can still be repaid. If even the interest cannot be repaid, even with the credit of the Russian government as a guarantee, it can only declare a breach of contract.

Although some investors are also aware of similar risks, but the return rate of 30%-50% is placed here, so they can't help but not enter the market for a gamble. This is a typical fluke mentality. Be the winner, never think of yourself as the loser.

   When Zhong Shi mentioned the Ponzi scheme, Zhong Yi realized how serious the problem was. Although Russia's economy has been sluggish in the past few years, as the saying goes, a lean camel is bigger than a horse. You must know that the former Soviet Union has been a powerful country that has been breaking up with the United States for nearly half a century!

   "It's really hard to say!" Zhong Shi shook his head, "I have decided to withdraw my investment in the Russian bond market. Because if there is a default, the debt restructuring will basically lose these funds."

  Nation does not go bankrupt, this is a famous saying. But in reality, countries do go bankrupt. In the near future, Argentina will go through one or even several bankruptcy processes. In the final process of debt restructuring, most creditors are required to reduce their claims by 80%, that is, 80% of the investment should not be wanted. In the end, the Argentine government will Pay the remaining 20% ​​of the debt amount to these creditors.

   Among them, something happened that surprised the world. A hedge fund in the United States disagreed with the Argentine government's approach and chose to take the Argentine government to court. The lawsuit lasted for ten years without any results. Under such circumstances, this hedge fund actually saw the opportunity and detained a warship belonging to the Argentine government in a certain port, which shocked the whole world.

   These are of course something to say later.

  Zhong Shi said that the withdrawal of investment from the Russian market is certainly one of the factors in terms of risk, but more importantly, the currency crisis sweeping the entire Southeast Asian region is about to happen. This crisis not only swept across the entire Southeast Asian region, but eventually turned into a catastrophic financial crisis. U.S. capital took advantage of the economic problems in Southeast Asia to teach an extremely vivid currency lesson to these countries whose economies have just taken off for a few years.

  Hearing that Zhong Shi was going to withdraw from the Russian market, Zhong Yi felt relieved. Looking at the blue sea, the two brothers fell into silence for a while.

   "Brother Fei, I heard that you made a fortune in Thailand recently, do you want to support the brothers?" Just when the Zhong brothers rarely enjoyed this moment of tranquility, an untimely voice suddenly sounded.

  Zhong Shi frowned involuntarily, looked towards the place where the sound came out, and found that at some point, a few young men in patterned shirts with thick gold necklaces around their necks were walking towards him. A few people walked and talked, talking rudely and loudly, and all the way along the way, people around them looked sideways. And several people turned a blind eye to this, still yelling loudly for fear that others would not know what kind of virtue they were.

   Before the four of them could reach Zhong Shi, a breath of nouveau riche rushed towards him, making Zhong Shi's original high brows frown a bit deeper.

   Thank you very much book friend Xin Gehao for voting for the monthly ticket! Thank you for your support~

  (end of this chapter)

Chapter end