White vultures' market manipulation SOP

"When poor countries go through an economic shock, the vultures of Wall Street descend upon them and destroy their currencies and bonds. "

And their stock markets also.

How did the American banks operate?

When they want to target a particular Asian country, first the US bank borrow say USD 2 billon worth of that Asian country's currency. Then they sell USD 1 billion worth of that Asian currency, causing the currency to collapse in thin (ie no liquidity) forex markets.

At the same time, they short-sell the Asian country's stocks, causing the stock market to tumble.

The Asian central bank, wanting to punish short-sellers of the Asian currency, then raise sharply their local interest rates to make borrowing costs very high for FX short-sellers, which also exacerbate the fall in local stock prices. That's when the Asian central bank fell into the US banks' trap. Because the US bank still have on hand USD 1 billion worth of the Asian currency (remember, they borrowed USD 2 billion worth and shorted just USD 1 billion worth of the Asian currency).

With the remaining USD 1 billion worth of Asian currency, they lent these out at very high interest rates, thanks to the central bank's rate hike.

After the Asian currency and stocks plunged enough, the US banks covered their short Asian currency and equities positions.

From their vicious operation, the US banks made very huge profits in their short-currency, short-equities and high-interest lending - all out of thin air !

So China is wise not to lift all its yuan forex capital controls.



- me, ex-interbank FX market maker