How extreme is this policy of increasing the overnight rates to 1,000%? It is the abolishment of overnight lending, and no one can afford this interest. Even drug dealers do not have such high profits!
When this policy is announced, it means the Thai Government’s 5 billion USD reserve fund is insufficient to deal with Soros.
Of course, Soros can also no longer continue to dump Baht after this policy is introduced.
The strategy of dumping Thai Baht had failed.
“Boss, has the Thai Government gone crazy? This policy will have a significant impact on its financial market!” Drucken Miller exclaimed. He is panicking. Without Thai Baht to dump, how are they going to lower the exchange rates?
Depending on those companies and foreign banks to dump Thai Baht is ineffective.
Soros calmly replied. “Stop panicking. You also said that this strategy would be a lose-lose situation for both parties. But this means the Thai Government does not have enough foreign reserves now!”
Thailand’s financial market will be greatly affected by the huge increase in overnight rates. Those financial institutions will need to prepare more funds to maintain their businesses.
Other than overnight lending, there are still one day, seven days, one month, lending. The Thai government will not dare to increase those rates to above 1,000%!
“But even if they do not have enough foreign reserves, our USD is also running low. Now, we can only borrow using the seven days and above system. The interest rate is also 1,000% per day, and the weekly interest is not a small amount. Our cost is increasing too fast!” Drucken Miller said.
Soros supported his head with one hand, and the other was holding a cigar. He needs to think carefully about how to handle this situation. Should he continue or admit his failure and withdraw from the market temporarily to raise enough funds to make a comeback!
“Miller, get the other three back. We need to discuss our next course of action.”
Although Soros is someone decisive, he still has lots of trust in his four top fund managers. He will discuss all the important decisions with them. For example, this operation to attack the Southeast Asia currencies is decided after getting everyone’s agreement.
……
“Soros is finished now. They don’t have Thai Baht anymore to dump and are going to suffer losses.” Fu Guangzheng laughed.
Feng Yu and Professor Liang exchanged looks and shook their heads.
“Guangzheng, the overnight rates, and one-day rates had increased by a lot, but there are no changes to the seven-day rates. Soros and his men can borrow using the seven-day lending system and continue to dump Baht.” Professor Liang explained.
“Use the seven-day lending? Their cost will increase too much, and their risk will be much higher.”
“But have you thought about how much they had put in? If they pull out now, how much losses will they incur? Furthermore, their future contracts were bought when the rate was at 24:1. If they cancel their contracts now, their losses will not be high. But if the Baht continue to depreciate, they will make high profits!” Feng Yu reminded Fu Guangzheng.
Soros and his men had built at least 15 billion USD worth of future contracts. Even if the Baht returned to 25:1, they would still make 600 million USD. As long as they had not lost more than 600 million USD in dumping Thai Baht, they will not suffer losses.
But based on Feng Yu’s calculations, Soros and his men had dumped Thai Baht like crazy earlier, and their loss is at least more than 800 million USD. The main losses come from the interest and depreciation.
That means even if the Baht recovered to 25:1, Soros and his men had still failed!
Although Soros and his men had successfully disrupted the Thai economy, they had suffered losses. This time, Soros had embarrassed himself.
Soros had prepared enough funds, and even if Feng Yu had not participated, it would still be sufficient. But Soros was too greedy. He firmly believes that once a county’s currency had depreciated, it will cause a chain reaction. That’s why he started building future contract portfolios in many Southeast Asian countries.
Although Soros had used leverage, he had bought all future long-term contracts and needs to place a deposit to prevent force cancellation of his contracts when the country’s currency increases in value.
Soros and his men had also built a huge portfolio. Despite using leverage, they still must invest a large amount. They had thought with Feng Yu and Kirilenko’s funds entering the market, and it will be sufficient to win the Thai Government. But who knows Feng Yu pull out suddenly!
To be honest, Soros’s current plight has got something to do with Feng Yu.
“That means you think Soros and his men will emerge victory?” Fu Guangzheng frowned and asked.
“No. It’s the opposite. I think Soros will suffer a defeat and will withdraw temporarily.” Feng Yu laughed and took a sip of coffee.
“Why?”
“The main reason is Soros does not have enough funds to support him. They had thought with me joining them, and they will win the Thai Government easily. But now, I had to pull out suddenly, leaving him to face the Thai Government alone. He does have funds, but needs time to transfer it over!”
“But didn’t you say the Thai Government had almost used up all their foreign reserves?” This was what Feng Yu said a few minutes ago.
“That’s right. The Thai government does not have sufficient funds. They had used most of their foreign reserves this year. This is also a big mistake on their part. Think about this. If your business met some problems and needs money to tide it over, what would you do?” Feng Yu asked.
“I will borrow. You are saying the Thai Government will get loans?” Fu Guangzheng understood what Feng Yu is trying to tell him. With additional funds, the Thai Government will inject the funds into their currency to pull up the rates.
Thailand is already heavily in debt and does not mind increasing their debt. The countries that are willing to lend money also do not want to see Thailand falls into a crisis.
Once Thailand’s economy collapsed, they will not get back the money they lent in the past! That means some countries must lend money to Thailand, or assist Thailand to increase the value of Baht. They must stabilize Thailand’s economy and stabilize its financial market!
Professor Liang looked at Feng Yu with approving looks. This student of his will do much better than him.
The economy is closely related to politics, and many people could not see this. But Feng Yu knew this. Furthermore, Feng Yu is still very young. He will exceed Professor Liang!
“Guangzheng, you still have much to learn.” Professor Liang smiled.
“Professor Liang, I will not disappoint you.” Fu Guangzheng said.
Feng Yu looked at Fu Guangzheng and Professor Liang. How come Fu Guangzheng suddenly become Professor Liang’s student?
……
Drucken Miller rushed into Soros’s office, shouting. “Boss, we are at our limits!”
