Chapter 210 Self-disruption

   On December 16, officials from the Bank of Mexico and the Mexican Ministry of Finance conducted emergency consultations to discuss the possibility of depreciation of the Mexican peso.

Regarding the devaluation, the two sides have already reached a preliminary consensus, and now the focus of the discussion is on the extent of the depreciation. Experts from the Bank of Mexico believe that a 10% devaluation is a feasible solution, while officials from the Ministry of Finance and think tanks insist on a 7% depreciation. , for them, this range is within an acceptable range, because the gains from dollar capital investment can offset the losses due to depreciation.

  The two parties were arguing over the extent of the depreciation. The meeting lasted for a whole morning. Experts from the two parties fought with each other and presented various data to refute the other party's plan. By noon, there was still no clear conclusion.

   "After discussing for so long, we haven't reached a consensus yet. Antonio, do you think so?" Seeing that it was noon, Otis had no choice but to stand up to smooth things over.

Although the experts and scholars on both sides confronted each other with saliva and saliva, the leaders of the two sides, President Otis and Minister Antonio, did not make a sound. At this juncture, the role of these currency experts and economists is reflected. Come.

  It was already noon, so Otis could only stop the debate and let his stomach be filled first. Since he is not an official of the Ministry of Finance and does not know about Antonio's itinerary, he can only ask for Antonio's opinion first.

No one would have thought that Antonio would not give Otis any face at all. He immediately got up and said, "Since the discussion has not reached a result, these consultants will naturally continue the discussion. I have a meeting in the afternoon, so I will not accompany you!" After finishing speaking , walked out of the conference room on his own.

   Several officials from the Ministry of Finance who followed him hurriedly followed the minister, and left the meeting room in full view.

  Otis snorted, but did not make a sound to keep Antonio. A morning's discussion had already made him very dissatisfied, and I believe that Minister Antonio, who was at the same level as him, was also the same. But for the sake of the overall situation, he still forced himself to suppress his anger.

  You should know that the Bank of Mexico is the central bank of Mexico and has independent operating powers granted by the parliament, which means that Mexico's monetary policy is in the hands of the Bank of Mexico, at least from a legal perspective. However, when it comes to specific operations, they still need to negotiate with the Ministry of Finance, which controls fiscal policy, in formulating monetary policy, and strive to perfectly cooperate with each other to jointly achieve the goal of promoting balanced economic growth.

   In addition, the decisions of both parties cannot bypass the president. However, the president's hurdle is easy. As long as there is sufficient evidence to convince the economic staff around the president, the resolutions of both parties will not be vetoed under normal circumstances.

  Now the Ministry of Finance, for its own benefit, ignores the peso, which is already under a lot of pressure, which makes Otis extremely annoyed. Although the difference between the two sides is not big, it is literally only a difference of 3 percentage points. But these 3 percentage points, when put into the entire currency operating system, mean a difference of billions or tens of billions of dollars, so the talents of the Bank of Mexico and the Ministry of Finance are clinging to the bottom line.

Just when the scene was extremely embarrassing, the door of the conference room was pushed open from the outside, which attracted the attention of all the officials and scholars in the conference room. A middle-aged man in his thirties came in with a serious expression on his face. Anxious, he said loudly as soon as he entered the door: "Mr. President, something is wrong..."

   The voice stopped abruptly.

  Okova is the secretary in charge of the president's daily communications. If there are any abnormal fluctuations in the foreign exchange market and the capital market, the officials in charge of monitoring will notify him as soon as possible, and then he will notify President Otis. As soon as he received the news about the foreign exchange market, he rushed to the meeting room immediately, forgetting even the basic etiquette of knocking on the door. When he opened his mouth to say "the big thing is not good", he found that everyone in the conference room was looking at him, which surprised him, and subconsciously stopped what he wanted to say.

   "What? Could it be that the sky is falling?" Seeing his cronies make a fool of themselves, Otis was even more annoyed, his face darkened, and he reprimanded him in a blunt tone.

  Okowa, who has been with Otis for a long time, still doesn't understand that the president is already dissatisfied with himself. But at this moment, he couldn't care about anything else, walked up to Otis in three steps at a time, covered his mouth with his hands, and whispered in Otis' ears what happened in the foreign exchange market just now.

   Seeing Okova's appearance, everyone in the conference room focused their eyes on Otis's face, hoping to see something from his face. But to their disappointment, from Okowa's report to the end, Otis' face did not change in the whole process.

"You, you, and you, come out with me!" After Okowa finished his report, Otis looked at several main consultants of the Bank of Mexico, motioned them to go out, then stood up, and said to the others: "Something happened suddenly. I need to go out to deal with it. I hope you will forgive me. Someone will take you to rest at noon. We will continue the discussion in the morning in the afternoon." After finishing speaking, he left the meeting room without looking back.

  Seeing his appearance, everyone realized that something big had happened, but their level was not high enough, so they couldn't find out what it was for a while. In this way, all the participating experts had a strong curiosity, and even the exquisite lunch was tasteless.

There are also smart people among them. From the identities of the experts named by Otis, they vaguely guessed that what happened is the foreign exchange market, because except one of these experts is an interest rate expert, the others are all foreign exchange experts. famous scholars.

  …

   "Exchange 2 billion US dollars in one morning!" In a small conference room, as soon as the door of the conference room was closed, Otis said to several experts who were still confused.

   "So many?" An older-looking scholar frowned. His name is Javier Bardem, he is a professor at the National Autonomous University of Mexico and one of the most important staff members of the Bank of Mexico. "Can we consider borrowing from the United States, deal with it for a while, and then consider devaluation."

   Regarding the devaluation of the peso, even the staff of the Bank of Mexico hold different views. Javier is one of them, but this difference in views has not been announced to the public, nor can it be made public.

   "No!" Otis shook his head, resolutely rejecting JaVale's proposal. He doesn't know anything else, but he is very clear about the new president. Although he is still pro-American on the surface, Otis has clearly noticed that the new president and the cabinet have gradually sought policy independence. , in order to get rid of the influence of the United States.

"However, according to the current rate of dollar outflow, even a 10% depreciation cannot guarantee anything, and it may lead to a large-scale outflow of dollars." road.

   "Now the dollar has flowed out on a large scale!" Otis said angrily, "and there are signs that this time it may be that American hedge funds are maliciously shorting the peso, just like they shorted the pound and the franc."

  When the British pound and the French franc were mentioned, everyone fell silent. They are experts in the study of currencies and naturally know the role played by hedge funds. The central bank of any country with a freely convertible currency would be amazed at the sheer power displayed by hedge funds.

  Now that similar things are about to happen in Mexico, everyone present is at a loss. You must know that the Quantum Fund alone has tens of billions of dollars in funds, which are enough to impact Mexico's fragile foreign exchange reserves.

  The most important thing now is no longer the discussion with the Ministry of Finance about 3 percentage points, but how to preserve the value of the peso in the future against hedge fund attacks.

   "Let go of the exchange rate system and let the peso float freely?" Javier thought for a long time and proposed a plan that seemed feasible, but he was immediately rejected as soon as he said it.

"This is simply impossible!" Otis categorically vetoed, "If the foreign exchange system is loosened rashly, it will inevitably lead to the flight of a large amount of U.S. dollar capital. At that time, not only the exchange rate market, but also the stock market and bond market will collapse together, because Most of the U.S. dollar capital is now invested in these two markets. At that time, it will not be as simple as a simple currency crisis, but will evolve into a crisis of the entire financial system, and even the real economy of this country will be buried with it. "

  Liberating the exchange rate system can only be the last option. Before that, the Bank of Mexico must do something, otherwise it will be infinitely accused by the entire market and the country, and even all the crimes will be placed on them. Moreover, the president will not agree. Therefore, Otis rejected JaVale's proposal without even thinking about it.

"Maybe we can learn from France and depreciate by 15% first to see how the market responds." At this time, another important staff member of Otis, Enrique, director of the Department of Economics and Management at the University of Guadalajara, said. "Nowadays, the foreign exchange reserves are under constant impact, but there should still be a lot of US dollar funds. Under such circumstances, it is impossible for us to do nothing. I believe that the funds shorting Mexico should have spent a lot of money during this period. Funds, as long as we can persuade the Ministry of Finance to allocate some US dollar capital, we may be able to withstand this attack.”

   These words naturally came to the heart of Otis, because in this way, all the charges of ineffective resistance fell on Antonio's head, although he was not in charge of foreign exchange at all. Without hesitation for a second, Otis nodded in agreement with JaVale's proposal.

  …

  At night, when the lights came on, the building of the Ministry of Finance was brightly lit. Although tomorrow was the weekend, Antonio still summoned the advisory group that was negotiating with the Bank of Mexico during the day.

  Antonio, who was physically and mentally exhausted, lay on the sofa, half-closed his eyes and listened to the members of the advisory group report on their work, one term after another came out of their mouths. Antonio listened for a long time, but he still didn't understand what these experts were going to say. In the end, his patience was exhausted, he sat up straight, and asked word by word: "What are your opinions and conclusions?"

  Several experts involved in the discussion immediately panicked. After looking at each other for a while, an older expert said: "The conclusion of our discussion with the bank is that we agree to depreciate the peso by 15%."

   "15%?"

  Antonio just felt dizzy for a while, and couldn't believe what he heard. Before he left, the bottom line he gave was 7%, how did it become 15% in one afternoon? You know, even the Bank of Mexico initially offered only 10%!

  (end of this chapter)