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1992 pound crisis review

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  fxrebatecentral Monetary System best forex rebate company December 5, 1978, the European Council decided to create, March 13, 1979 was formally establ bestforexrebatecompanyhed, its essence is a fixed adjustable cashback forex forexrebatecommission system its operating mechanism has two basic elements: one is the currency blue European Currency Unit (ECU); the second is the lattice system exchange rate system European Currency Unit... The European Monetary System was created by the European Council on December 5, 1978 rebatesforexbroker formally established on March 13, 1979. Currency, the size of the weight of each member states currency in it is determined by their respective economic strength of the European monetary system exchange rate system to the European monetary unit as the center, so that the member states currencies are pegged to the European monetary unit, and then through the European monetary unit so that the member states currencies to determine the bilateral fixed exchange rate this exchange rate system is called the lattice system, or parity network European monetary unit to determine the itself Breeds certain contradictions The strength of the EC member states is not fixed, and once it changes to a certain extent, it requires the adjustment of the weights of the currencies of the member states Although it is stipulated that the weights change every five years, if the change in strength is not detected in time or the change in strength is not detected in time or the adjustment is not detected in time, the spontaneous adjustment through the market will cause the European monetary system to explode The crisis occurred in the European currency market in mid-September 1992, the most serious currency crisis since World War II, the root cause of which was the increase in German power disrupted the balance of power within the European Community At that time, Germanys economic power was greatly enhanced by the reunification of East and West Germany, although the share of the German mark in the European monetary unit expressed in marks was not delivered, but due to the increase in the exchange rate of the mark against the dollar, the mark in the European monetary unit Because the European monetary unit is the unit of account for the exchange of goods and services and capital flows of the EC member states, changes in the value of the mark or German monetary policy can influence not only the macroeconomy of Germany, but also have a greater impact on the macroeconomics of other EC members, while the British and Italian economies have been in a slump, with slow growth and increased unemployment, they need to implement They needed to implement a low interest rate policy to lower the borrowing costs of enterprises, so that they could increase investment, expand employment, increase production, and stimulate the consumption of the population to revitalize the economy But at that time, Germany had a huge fiscal deficit after the reunification of East and West Germany, and the government feared that this would lead to inflation, causing dissatisfaction among Germans who were used to low inflation and the outbreak of political and social problems Therefore, Germany, which had an inflation rate of only 3.5%, not only refused to Therefore, instead of refusing the request of the last G-7 summit to lower the interest rate, Germany increased the discount rate to 8.75% in July 1992. In this way, the excessive German interest rate caused the foreign exchange market to sell the British pound and the lira and rush to buy the mark, resulting in a sharp drop in the exchange rate of the lira and the British pound, which was the direct cause of the European currency crisis in 1992. The Finnish central bank had to sell the German mark to buy the Finnish mark in order to maintain the ratio, but the Finnish mark was still not diarrhea not, the Finnish central banks German mark was limited, on September 8, the Finnish government suddenly announced the Finnish mark German mark decoupling, free floating at that time the British and French governments On the seriousness of the problem and suggested to the German government to lower interest rates, but Germany considered the decoupling of the Finnish mark insignificant, rejected the British and French governments proposal, the German central bank governor Schlesinger publicly announced on September 11, Germany will never lower interest rates currency market speculators get the news on the speculative target unscrupulously turned to the ever-firm German mark on September 12, the European monetary system The Italian lira, which has always been a soft currency, was in trouble, and the exchange rate fell all the way down to the maximum lower limit of the lira to mark exchange rate in the European Monetary System exchange rate mechanism. devaluation, the ratio will be adjusted downward by 3.5%, while the other 10 currencies of the European monetary system will appreciate by 3.5%, which is the first adjustment of the European monetary system since January 12, 1987 to this point, the German government only to maintain the operation of the European monetary system and make minor concessions, on September 14 officially announced that the discount rate reduced by half a percentage point, from 8.75% to 8.25%, which is Germanys first interest rate cut in five years Germanys move was highly appreciated by the United States, Britain and France, but it was too late, a bigger storm in the British foreign exchange market scraped up on the day after Germany announced the interest rate cut, the British pound exchange rate all the way down, the pound to the mark ratio broke through the three lines of defense to 1 pound equals 2.78 marks pound the wild fall of the British government was in disarray, in the 16th Early in the morning announced an increase in bank interest rates by 2 percentage points, and a few hours later announced an increase of 3 percentage points, the interest rate from 10% to 15% a day 2 times to raise interest rates in the recent history of the United Kingdom is unique in Britain to make such anomalous move is to attract foreign short-term capital inflows, increasing demand for the pound to stabilize the exchange rate of the pound, but the changes in the market is subtle, once the confidence shaken, the general trend Has become, the trend of exchange rate movements will be difficult to stop the pound fell wildly, announced the withdrawal from the European monetary system from September 15 to 16, 1992, the central banks injected tens of billions of pounds to support the pound, but to no avail on the 16th the pound to the mark ratio fell from the previous days 1 pound to 2.78 marks to 1 pound to 2.64 marks, the pound to the dollar ratio also fell to 1 pound to After all the organs were exhausted, on the evening of September 16, British Chancellor of the Exchequer Lamont announced the withdrawal of the UK from the European Monetary System and the reduction of the interest rate by 3 percentage points, and on the morning of the 17th the interest rate was reduced by 2 percentage points, returning to the original level of 10%. The Italian government spent 40 trillion lira worth of foreign exchange reserves in order to save the lira from falling, but it did not work, so it had to announce that the lira had withdrawn from the European monetary system and let it float freely. January to September 1992, more than five years in the European monetary system, the exchange rate has only been adjusted once, and in September 13-16, 92, within three days, the second adjustment, which shows the seriousness of this European currency crisis until September 20, 1992, the French referendum adopted its central idea is to establish the countries that are still very different in culture and politics into a near European The United States of America political entity, its member states not only to use the same currency, but also to pursue a common foreign and security policy of the Maastricht Treaty, only to make the European currency storm temporarily calmed down, the pound, the lira tends to devalue after the equilibrium of the state of the European currency crisis lessons of this currency crisis has a number of profound lessons, just to ensure the stability of Hong Kongs financial markets, there are also important insights, which is To strengthen the coordination and coordination of international monetary and financial policies Western Europes financial September storm, to a large extent, reflects the incoherence of the monetary and financial policies of the major industrial countries of the European Community at the time, Germany in its growing economic strength, the Mark firm situation, but also paranoid about their own interests, disregarding the British and Italian economies have been in the doldrums, and for their own economic development to lower interest rates, not only rejected the seven heads of state In the case that the Finnish mark was forced to decouple from the German mark, it did not realize the urgency of maintaining the mechanism of the European monetary system, and even openly announced that it would never lower the interest rate until the storm in the foreign exchange market suddenly rose, and then announced that it would lower the discount rate by half a percentage point, but this only gave speculators in the foreign exchange market the expectation that they thought that Germany used to Of course, the fault of this crisis cannot be blamed entirely on Germany, but it should be emphasized that in todays economic integration and globalization, despite the increasing economic contradictions between countries, no country can be bent on its own, and countries can only seek stable development in cooperation and coordination. International cooperation and policy coordination, this trend has now become irreversible trend of the so-called policy coordination is to make common adjustments to certain macroeconomic policies, joint intervention in mutual economic relations and economic activities, in order to achieve the purpose of mutual assistance and mutual benefit This is mainly due to the spill-over effect of national economic policies (spill-overeffect), that is, the policies adopted by one country often affect other countries. This is mainly due to the spill-over effect of national economic policies (spill-overeffect), that is, the policies adopted by one country often affect the economic operation of other countries. Thus, the coordinated economic policies adopted by countries will promote the development of the world economy, while going their own way will often have adverse consequences
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