Chapter 131 The Louvre Agreement

Almost every year at the beginning of the year is the busiest time for the finance ministries of Western countries, because the budget for the new year is about to be released. The so-called budget is to estimate how much the government will spend in this fiscal year. In Western countries, the department responsible for preparing the budget is usually the Ministry of Finance of each country.

The Ministry of Finance will make a detailed financial report based on the budgets of various government departments. This report is only a plan so far. Whether the plan can be implemented smoothly depends on the cooperation of the other two important joints, the Congress and the Central Bank.

In some western countries, the treasury of the central bank is subordinate, but in the United States, the Federal Reserve exists independently of the treasury. The Federal Reserve does not have to be responsible to the government for any decisions it makes, but to serve the American financial institutions represented by the Federal Reserve Board.

The first hurdle for the fiscal budget designated by the Ministry of Finance is Congress. Now Reagan's Republican Party firmly holds the majority of seats in Congress. As long as there are no differences within the Republican Party, the budget will basically not encounter any twists and turns in Congress. On the contrary, the Federal Reserve is a bit difficult. In this series of processes, the Ministry of Finance only estimates how much the government will spend, while Congress decides whether to agree with the government to spend the money. It is the Fed that helps the government raise the money. sum of money.

The U.S. government's budget is definitely the largest in the world, and the Federal Reserve has to find ways to raise this money every year. Most of this money comes from Wall Street's deep-pocketed investment banks and financial institutions. The deal between the Fed and Wall Street is primarily through U.S. Treasuries.

Whenever the government needs to issue national debt, it will consult with various financial institutions through bidding to determine the overloaded interest rate and the scale of issuance. If there is no interest in the national debt of the United States next year, it will be a big event that will affect the government's finances in the next year.

Just last year, due to the impact of the Plaza Accord. U.S. bond yields continued to fall. However, although inflation has stimulated exports, it has not improved the tax revenue and fiscal expenditure of each government. The United States has always been facing tremendous pressure from the Soviet Union, and military expenditures will only increase. The current high inflation rate makes the large financial institutions in the United States extremely dissatisfied. If the dollar continues to depreciate like this, then the financial institutions will definitely not Will go after US Treasury bonds.

Paul Volcker, the current chairman of the Federal Reserve, is clearly on Wall Street's side, and his distaste for inflation is well known in American financial circles. He has repeatedly said in public that inflation is a public hazard to the American economic circles, and Paul Walker's actions have also proved that he is a staunch opponent of the "Plaza Plan".

It was against this background that the US bond tender in 1987 faced many difficulties. And just at this time, Seryozha intends to enter the bond market. Seryozha asked Mikhail to consult Bill Gross, who surprisingly seemed confident in the 1987 Treasury yield.

"Sir, Federal Reserve Chairman Paul Volcker's attitude towards inflation is well known. Under such circumstances, he will make full use of his power to withdraw excess funds from the market, so this year's treasury bond issuance amount may be unprecedented. Big, and the interest rate should be very attractive!" Bill Gross said confidently.

"But the dollar is depreciating now!" Mikhail asked back, still uneasy.

"Sir, Paul Walker did not obey President Reagan's words. He is extremely conceited and has always been known for his tough attitude. He is absolutely impossible to cooperate with the government's fiscal policy. Only the Treasury Department can cooperate with him! Therefore, I judge the value of the US dollar. It won't be long before the depreciation trend requires the government to intervene. The Treasury will certainly respond to Paul Volcker's tightening of liquidity."

After listening to Bill Gross' explanation,

Mikhail relayed the argument of Bill Gross to Sergesha. After Sergesha heard it, he stood on the side of Bill Gross almost without thinking.

"Mikhail, we are not short of money now, what we lack is talents, safe and stable capital circulation channels, and the means to keep this wealth continuously increasing in value, so we need to change our thinking, and the income is stable. To participate in national debt, we also need fast-moving consumer companies with stable cash flow, and infrastructure investment like British Gas is also a good way to preserve our wealth! Doubt, support Bill Gross and the Blackstone Group with all your strength!"

With these words from Seryozha, Mikhail was naturally relieved a lot. Only a week or so later, Bill Gross' prophecy was fulfilled.

While the funds from all over the world were still chasing after the Japanese economy, the U.S. Treasury finally couldn't sit still. On February 22, 1987, the finance ministers and central bank governors of the United States, the United Kingdom, France, the Federal Republic of Germany, Japan, Canada, and Italy signed a new agreement at the Louvre in Paris. According to this agreement, the seven countries will jointly intervene in the exchange rate market to prevent the continued depreciation of the dollar. As soon as the news came out, the yen began to depreciate sharply due to the positive impact of the US dollar. Sergei, who had fled the Japanese market a long time ago, successfully escaped this catastrophe and kept his own victory.

Bill Gross' bond investments have also paid off handsomely these days. The short-term treasury bonds held by the Bank of Columbia rose one after another. Although the increase was not large, it was a signal to the treasury bond market. After raising funds, he entered Japan's foreign exchange market again.

Seryozha has been paying attention to Bill Gross' trading techniques. Although Bill Gross believes that the Japanese market has begun to suffer under the dominance of the Louvre Agreement, it is still an attractive investment target. However, Seryozha's funds are too large, and if he makes a move, it will have a significant impact on the market, so this time Seryozha does not plan to re-enter the Japanese market with Bill Gross.

Sergesha put forward a new consultation to Blackstone through Mikhail, that is, how to acquire Volkswagen from the Federal Government of Germany at the least cost.