Rebirth of the Financial Overlord

Jamin Disraeli said: There are no eternal friends, only eternal interests.

During World War II, the Anglo-Soviet reconciliation, Prime Minister Winston Churchill extended this sentence: There are no eternal friends, nor eternal enemies, only eternal interests.

No surprises.

During the weekend, Norman Lamont led the special economic advisory group headed by Pound Brook, and Capital One's financial research team headed by Robert John, and launched a private discussion in the reception room on the top floor of the Navy Building. discuss.

Mr. Brooke. The market's bearish view on the pound is based on the weak economic foundation of the United Kingdom. Even Germany believes that the pound needs to be devalued. Now, you are tantamount to persuading us to give up the profits we have made.

Mr John. From an objective point of view, our proposal is not entirely in the interest of the pound. It is a balance.

I don't think sterling has more room to fall, although the Bank of England's foreign exchange reserves have fallen compared to before. But it also means that the central bank has more liberal monetary policy to adjust the economy.

But it will take time.

Yes, time is what we need, but it's also what you need, isn't it? There is no contradiction.

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Pound Brook proposed that Capital One gradually liquidate its short positions on the British pound, and he chose the sharpest point of attack as a bargaining chip for this negotiation. There are good reasons. When the British government announced its withdrawal from the European exchange rate system, the Bank of England was not obliged to maintain the value of the pound against the mark, and the attack on the pound by international hot money came to an end.

This should have been the logic of being short on the pound, but Brooke regarded it as the most favorable breakthrough.

Some people may ask that the Bank of England is no longer obliged to buy the pound, which means that the market lacks more funds to buy, which is even more negative for the pound and will further depreciate the pound. How could it become a bargaining chip for the Bank of England to negotiate with short sellers.

the reason is simple.

The price of a currency is based on a country's sovereign reputation, and the decisive factor is the purchase of capital, which depends on different judgments on market prices.

From a larger perspective, it is like the relationship between two connected reservoirs. The currency exchange rate between countries is like two different pools. The water flows between the two pools, and the two maintain There is a relative equilibrium, and the price at this equilibrium is the normal exchange rate level.

However, in order to keep the pound in the European exchange rate system, the pound was forced to withstand the pit of the German central bank's continuous interest rate hikes, and a dam was forced to be set up between the two pools to prevent the inflow of pool water.

The logic of the market’s bearish view of the British pound is based on this relationship. The use of funds to continuously push up the price of the US dollar and the Deutsche mark will tilt the balance and put more and more pressure on the Bank of England. When this pit reaches a certain limit, the British water level will It is equivalent to rising continuously, the balance is broken, and the water in the British pool will involuntarily flow into Germany, which has dug a big hole, until the dam limit formed by the foreign exchange in England bursts to achieve the effect of flood discharge.

Now that the UK has been forced out of the ERM, it also means that the water in the UK and Germany and the pegged currency can flow freely again, although there will be a short-term plummet in the initial flood, but the lower exchange rate is bound to Stimulate the British economy to strengthen, and the water level will return to a balanced level.

In other words, after the Bank of England announces that the British pound will no longer be pegged to the mark, the British pound will depreciate sharply in a short period of time, and then reach a market recognized as an equilibrium price. As the market price stabilizes, both foreign exchange buyers and sellers in the market will be in a relative position. level of balance.

Man is born in nature, and it is doomed that all derived social structures cannot escape from nature.

After all, the United Kingdom is one of the most powerful countries in the world. The daily turnover of the British pound is also hundreds of billions of dollars. Whether it is Capital One, Wall Street or other sellers, shorting the British pound is at the high point of the general trend .

Now, this trend has changed dramatically with the Bank of England's exit from the European Exchange Rate Mechanism.

It means that with the passage of time, the market buyer will no longer be the Bank of England alone, but buyers and sellers composed of countless foreign exchange dealers, and the transaction amount will not be comparable to that of an investment company.

In other words, even if you hold more pounds and continue to short, there will be no random followers in the market. Instead, there may be more multinational trading companies or foreign exchange exchanges doing arbitrage in the opposite direction.

Of course, this is just a bargaining chip used by the British Economic Special Advisory Group.

In fact, the market has been beaten to death.

That's right, he was beaten to death.

Since the fall of the pound has completely exceeded market expectations, all the bulls involved in the buying of the pound have been killed, and they have been fatally strangled again and again. The bulls who bought the pound have a deep fear of buying the pound just like a frightened bird. .

If the market fluctuates slightly, the bulls who bought the pound at the bottom will immediately choose to stop the loss and get out, making the price of the pound like a dwarf who has fallen into the abyss, with no sign of a rebound at all.

In another room across the reception room, Shen Jiannan brought Qina Kanowski and Yulia Sidorov to talk with John Major and several chancellors of the exchequer.

Mr. Brooke has a good point, but the UK needs lower interest rates to stimulate the economy. Compared with time, the UK needs more time, at least, more time than we need to close out our positions.

I don't think it's in our interest to liquidate our positions now. Unless, you can make more concessions.

scoundrel.

Totally scoundrel and hooligan.

Shen Jiannan's face was completely devoid of the humility that one should have when meeting a big man like the Prime Minister. Except for the polite greeting at the beginning, it was completely a hooligan posture that a dead pig is not afraid of boiling water.

The muscles in the corners of John Major's eyes trembled involuntarily at the words of this guy, and the Minister of Commerce and Finance, regardless of the Minister of Finance, and the cabinet advisers were all stared angrily at the words of this guy.

When has the mighty British Empire been humiliated like this?

Finally, John Hancock, Minister of the Interior and Speaker of the Privy Council, couldn't stand this guy's arrogance and rascal attitude.

Shen. This is Great Britain. Haven't you considered how this matter will end?

threaten.

Outright threats.

Shen Jiannan's momentum suddenly withered, showing a look of fear. But Qina Kanowski didn't think it was a big deal at all, and slapped the table hard.

Mr. Hancock, are you threatening us?

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