Chapter 1385 - 1379: Bubble Economy
"Haha, you're asking the right person." The dark-skinned old man discussing matters with "Chen" showed an arrogant expression. "At the time, we had already realized that the fall of Sea Domain Company would cause a great mess for Japan's financial market, so we immediately started targeting Japanese goods market. We've made quite a profit this time!"
"Chen" wasn't pleased hearing his companion boast in front of Lin Chuan and glared at him: "Alright, Fuer, do you think Lin couldn't see this opportunity with his skills? If I'm not mistaken, Lin, you made a move back then too, right?"
Lin Chuan nodded and said, "That's right, I was in Japan at that time."
"Chen" childishly challenged Fuer with a glare, while Fuer merely smiled, already familiar with his temperament and didn't mind.
Lin Chuan took the opportunity to ask, "But now, even though the Japanese government has increased measures and reached a unanimous agreement with international financial speculators, it seems like they've temporarily stabilized. I'm wondering what you think the next step for Japan's financial market might be?"
Lin Chuan didn't want to reveal his own judgment first, so he asked broadly about Japan's "financial market."
The people present exchanged looks, unsure why Lin Chuan was so concerned about this matter.
Chen Xian said, "Lin, although those big financial speculators are ruthless, they care greatly about integrity. Since they've reached an agreement with the Japanese government, it means they've truly withdrawn. In the short term, they probably won't speculate on Japan's market again? Without anyone to sensationalize, I think Japan's market will be stable for quite a while. Why do you ask this question?"
Although the others didn't directly voice opinions, everyone except Francis nodded silently, clearly agreeing with Chen's judgment.
Lin Chuan nodded thoughtfully and turned to Francis: "Francis, it seems you have a different opinion?"
Francis hesitated but still expressed his judgment: "To me, Chen's judgment seems to have fallen into a misconception, thinking that all market instability is due to human manipulation, a typical libertarian market view. But actually, if Japan's economy itself has issues, a financial turmoil could erupt on its own!"
"What? Economic issues on its own? How is that possible?"
Everyone showed disapproval upon hearing Francis's analysis: "Japan is one of the largest free markets in the world with many companies holding key technologies. Although recently they face strong competition from China in electronics and home appliances, they still have strong competitiveness in basic components and automotive fields. No company can truly threaten them in the short term."
"Exactly, although Japan's economic growth has been stagnant since the 1990s, it hasn't regressed. And precisely because growth is low, their financial bubbles are relatively few. Such an economy would hardly self-create a crisis leading to turbulence."
Lin Chuan didn't agree with their judgment.
Slow economic growth doesn't necessarily mean no bubbles exist within the economy?
That's merely an illusion from Japan as a "developed, mature economy." Consider Wenda in Africa's recent economic crisis, was its growth rate very high?
Certainly not, yet this doesn't prevent them from being deeply mired in crisis, with its root being massive bubble creation. However, their bubbles are not to create a false prosperity but to maintain their economy from major decline!
Japan's domestic bubbles have a similar implication.
Such "bubbles" are more concealed, after all, who would think a non-growing economy would have bubbles? It's against common knowledge, but once it explodes, its destructiveness might exceed those in high-growth economies.
The reason is simple.
High-growth economies might harbor various unstable factors, but their inherent high growth can somewhat compensate for the losses from bubble bursts.
Of course, they can't fully cover these losses, otherwise bubbles wouldn't burst at all.
But for a stagnant economy, they can only swallow the bitter fruit after a bubble burst, without any room for resistance!
For example, China currently has an astounding economic growth with many abroad claiming a world-class bubble forming in China, yet it's an economy still primarily driven by the secondary sector. In other words, most of its economy is real economy!
Although such economic structures present numerous problems of redundant investment and redundant construction, when it comes to bubbles, it can't compare with those economies primarily driven by financial markets!
The most typical example being the United States.
The US is dubbed the world's top industrial nation and simultaneously the strongest nation in real economy.
However, how many have noticed, now over seventy percent of its economy is tertiary industry!
And within the tertiary industry, over seventy percent, almost half of its annual GDP, is in financial sector!
If anyone pays attention to this point, upon slightly considering the high-leverage financial derivatives from the US financial sphere, they can realize how massive the bubbles therein are!
The problem is they possess strong US dollar hegemony; as the world reserve currency, they can nearly infinitely—though sacrificing the dollar's credibility—shift their crisis globally when it erupts.
But Japan doesn't have these conditions.
Although their domestic financial ratio is lower than the US, to maximally stimulate the economy and maintain their status in international finance, Japan has long implemented ultra-low-interest policies!
In other words, when economic crisis strikes, they can't even further lower interest rates to stimulate the economy, at that point they'd have to tear their reputation, destroy the credibility of Japanese currency, and forcibly start the printing press!
However, this crisis is overshadowed by Japan as the world's second-largest free market, with no one capable of linking the last yen crisis to a future financial crisis.
Given Lin Chuan's reminder, even during Francis and others' discussion, they couldn't escape this cognitive trap, defending Japan vigorously.
Now that China's economy is thoroughly integrated into the global economy, if major economies face financial crisis, China couldn't remain unscathed.
However, China's economic structure is mainly secondary industry-oriented, with a semi-closed financial system, coupled with domestic finance developing relatively lagging, the country consciously controls issuance of high-leverage financial products.
Lin Chuan felt he might grasp something.
Could it be, the restriction on finance is consciously enacted by the country? But for what purpose?
Is it due to inherent mistrust of finance? Or possibly, the nation might have discerned the risks therein, preferring Western countries to test the waters first?
"Alright, let's not discuss Japan's issue further." Lin Chuan pretended not swayed by others, changing the subject: "I wonder if any of you have lucrative opportunities recently? Now our Sichuan University Group aims to step abroad and make money, but we lack knowledge about foreign finance."
Chen, hearing Lin Chuan's words, excitedly approached: "Lin, originally we shouldn't disclose this to new members like you, but I believe Lin's capability will surely become a pillar for our Red Tea Society, so this time, we can reveal it to you and let you join our action."
"Oh?" Lin Chuan certainly was very interested. Sichuan University Group's liquidity having increased significantly, even after utilizing most of Japan's profit for maximum expansion, plenty remains. Can't let them merely rot there!
Francis and Jon, Fuer, after murmuring briefly, agreed with Chen's judgment; through this cooperation absorbing Lin Chuan as core member brings immense benefits to Red Tea Society's influence expansion.
Francis looked at Lin Chuan and said: "We've analyzed and believe, earlier when South Australia's resistance against China's steel enterprises' pressure, although they paid a price, causing iron ore procurement volumes to instantly hit rock bottom, many financial speculators lacked optimism for South Australia, simultaneously pushing in futures market, yet it didn't suppress its price. This indicates South Australia and those iron ore firms definitely injected even greater funds to maintain prices."
"Indeed, but these funds couldn't materialize from thin air, they surely tapped accumulated reserves over the years, I even suspect some movements from South Australia's state reserves."
"No way?" Lin Chuan certainly understood what those funds meant for a resource enterprise, more so concerning South Australian government's actions disrupting "the rules of the game" and also potential aftermaths, indicating South Australia can't weather storms now, especially concerning exchange market!