Tie yourself up against hot money

Article | reporter Zheng Jingxin source | The January 2011 issue of the Journal of Excellence do you have a large amount of money in the bank? If so, do you think that rising inflation over the month is eroding the interest and even the principal of the deposit?　　But when you worry, the "rough" dollar (commonly known as "hot Money") is scrambling to get into the country. According to the People's Bank data, October 2010 new foreign exchange accounted for up to 519 billion yuan, a 30-month high, the chain of a large increase of 79%.　　Although the use of "new foreign exchange account-trade surplus-foreign direct investment" method to calculate the scale of hot money is not scientific, but it is certain that in the absence of major fluctuations in the trade surplus and foreign direct investment, the sudden surge in foreign exchange accounts is unrelated to the influx of hot money. And this may just be a new beginning.　　In early November, the Federal Reserve announced a new round of quantitative easing (quantitativeeasing, referred to as QE2), which was to buy $600 billion trillion (about 4 trillion yuan) of long-term U.S. Treasuries by the middle of 2011. China clearly disagreed with the Fed's QE2. Zhou Xiaochuan put forward "pool" theory as a coping strategy, at the same time, also Tan Chen, "in the market existence spreads, the arbitrage behavior itself is logical." "When a country's loose monetary policy is seen as" hot money "in another country, it has been declared that the overall coordination of the countries of the world has failed since the crisis.　　Behind this is a policy portrayal of the "two-speed recovery" of emerging market countries and developed countries (i.e., the former recovery is much faster than the latter). QE2 's logic "The US economy is still recovering, the US says it cannot quit, and it is based on its own judgment to introduce a second easing policy."　　Zheng, a professor at Renmin University of China, told the press. From the peak of economic expansion to the end of 2009, the United States lost 8.4 million jobs, but so far only 900,000 jobs have been restored.　　Bernanke pointed out that the Fed is concerned that prolonged unemployment will escalate short-term cyclical unemployment into long-term structural unemployment, because when a person does not work for a long time, his skills will not only become rusty but will not keep pace with changes in the economic development environment. The Fed, therefore, hopes to be able to stimulate the economy again to counter the risk of stagnation in the long-term high unemployment rate. The US benchmark interest rate has fallen to zero, and nominal interest rates have barely been lowered.　　Meanwhile, America's core inflation rate (excluding food and energy) is only 0.6%, the lowest since 1957.　　At a time when nominal interest rates could not continue to fall and inflation was at a low point, the Fed was concerned that the rise in real interest rates, the nominal rate of inflation, would increase the real debt burden on US residents and businesses, while curbing investment and other spending by residents and businesses. Based on the above judgments, the Fed's QE2 seems "taken for granted", but as the "Central Bank of the global economy", the Fed's currencyThe effect of policy will affect the global economy.　　In particular, a "two-speed recovery" ramp between the United States and emerging market countries will make the dollar a hot money to push up inflation in emerging market countries. In this case, Mr Bernanke argues that QE2 helps to rebalance the global economy to form the basis for a sustained global recovery: Emerging market countries will raise interest rates to discourage hot money inflows and inflationary threats by QE2, and thus attract more money, eventually leading to a rise in the currencies of these countries, thereby reducing exports,　　Increased imports from developed countries. It is not hard to see that QE2 's international policy goals are actually directed at the exchange rates of emerging market countries.　　Perhaps the Fed believes that it is hard to see the emerging market countries, particularly China, by well-meaning and even congressional acts, and that through QE2 action or even more force these countries to succumb to currency appreciation. Pool of the burden of hot money although hot, the key to see how you use. Some scholars believe that if we can pass the stock market, turn hot money into the financing of enterprise development, then it is good to change bad things.　　Mallaby, a senior researcher at the U.S. Foreign Relations Committee, argues that emerging market countries should consider India's approach and turn hot money into a stable investment through IPOs. Mallaby also told the "talent" reporter, "the way the IPO can work, but also whether the stock market management is perfect, whether to open to foreign investors, and whether there is a good faith in the earnings culture." These need time to develop. "In addition, we have to consider the introduction of hot money into the stock market, in the outflow of funds, the risk of a sharp fall in the stock index can afford?"　　In fact, when the Wall Street financial crisis broke out, the withdrawal of foreign capital had made Indian investors miserable. "Bring short-term speculative money into the pool, and then release it from the pool when it needs to retreat." "This is the main idea of Zhou's" pool "theory, and the stock market clearly cannot meet this requirement.　　How did the central bank control the retreat of hot money from the stock market? Therefore, the central bank is more willing to choose the deposit reserve, the vote as a hot money sterilisation means. The central bank has raised the reserve requirement ratio three times since November, and the bank reserve ratio has reached 18.5%.　　The central bank's current balance is roughly 4.8 trillion. Some academics have estimated the central bank's sterilisation costs, thinking that the central bank's annual interest rate of 120 billion and 175 billion per cent of the interest on reserve payments is close to 300 billion.　　The central bank's annual reserve interest income is roughly 435.6 billion. According to the above estimates, the central bank's current sterilisation costs can still be offset from the interest income of foreign exchange reserves, but with the appreciation of the renminbi, the increase in interest rate, the sterilisation costs will only be greater.　　And the single central bank's sterilisation may have accidentally hurt the development of domestic banks. "The central bank should actually prevent the capital projects of hot money, but because it can not be divided, only from the total control, so that domestic banks to follow the board." Such a high reserve ratio, which clearly affected the efficiency of the banks. Now it's not clear that we're going to have to tie our own hands in global banking competition.　　Zheng told the Press of Excellence. "Beggar your Neighbour" then, can the policies of the two countries find other alternatives besides "attacking" and "preventing"?　　After all, the extreme of "attack" and "prevention" is protectionism, and history proves that "beggar-thy-neighbour" has no winner. According to Bernanke's statement at the Frankfurt central Bank governor's meeting, QE2 to be fully effective requires emerging market countries to adopt a more market-based exchange rate regime to push the global rebalancing. But Zheng does not agree, "the exchange rate is determined by the market, if the market is really rational, there is a real estate bubble?" Yuanzheng, chief economist at BOC International Securities, said to reporters that if the US currency taps were wide open, we would not be able to solve the influx of hot money even if we took "plug" and "Pool pumping". The first step in solving the problem should be a global coordination mechanism that would keep America's currency taps tight. "At least the United States can not QE3?" Do not are, love how to do, at least tell us how the U.S. economy they are going to do, how can I help you. "In Yuanzheng's view, sticking to the direction of globalisation is good for China." Now the American QE2 is against globalization, it forces the countries "damming flood". China should take on more international responsibility for its own benefit, which is important to tell Americans you can't.