Chapter 399 - 379: Arbitrage_2
Arbitrage is the simplest profit model in financial markets, almost anyone who can do math would figure out where it is most cost-effective to send their money.
When the interest rates for US Dollar or Euro are low, I borrow on a large scale, then look for which country’s bank offers high interest rates, and I lend money to them.
Because when you deposit money in a bank, it is actually like lending money to the bank!
Seemingly simple, but in fact, only real big capital can ensure profitability.
Because there are very few places that can handle large amounts of capital right now...
The island country is one, but to combat the harvesting by the US Dollar tide of Daddy United States, they have been implementing negative interest rates for many years.
East is another one, but they have implemented strict capital control policies, with strict controls on both the inflow and outflow of funds.
Europe also counts, but since 2008, Europe has been engaged in the Euro defense war, and the Euro has entered a zero interest rate era; at the same time, in order to protect the value of their assets, they firmly defend the Euro exchange rate.
To earn money through massive arbitrage by injecting capital in these three places, you need astronomical funds and the extraordinary means to stir the opponent’s exchange rate.
On the contrary, for these three places, it’s relatively simpler to flee to the United States for arbitrage when the US Dollar raises interest rates.
This is why all capital in developing countries runs off!
Because during the period when the US Dollar raises interest rates, even if they do nothing, just putting money in the United States, they can earn huge profits through arbitrage when Daddy United States hikes rates.