At this time, since Mu Lin was unable to be present in person and also did not want to leave Country Y temporarily, he invited Cross to come to Country Y. As this sniping plan needed to be strictly confidential, otherwise it would lead to failure.
Because country Y currently faced a large-scale withdrawal of investments by merchants, the overall economic situation was declining. At the same time, due to a significant increase in unemployment and Mu Lin’s punishment of those wealthy families and gangsters in country Y who were unjust, the domestic security situation was in chaos. This provided feasibility for Mu Lin to carry out his plan.
As soon as the group entered Mu Lin’s living room, Mu Lin got straight to the point and said to Cross, “Cross, this time I plan to short the pound and the lira. What do you think of my plan?”
“Okay!” Cross didn’t hesitate and began reading the plan. Meanwhile, Mu Lin handed a copy to Claire, because during the upcoming sniper battle, there needed to be a central contact person. Cross currently didn’t carry enough authority—only Claire was the most suitable candidate.
The pound in country Y had been the main circulating currency in the world for over 200 years. Originally, it adopted the gold standard system, linked to gold, and occupied a very important position in the world financial market. However, after World War I and the stock market crash in 1929, the British government was forced to abandon the gold standard system and adopt a floating system, causing the pound’s position in the world market to continuously decline. Nevertheless, the pound and the dollar still served as global currencies and occupied an important position in the world currency system.
As an important institution to ensure market stability—the Bank of England—was a strong pillar of country Y’s financial system, possessing extremely rich market experience and strong strength. No one had ever dared to challenge this national financial system, or even thought about it. However, Mu Lin decided to do something no one had done before—to shake the so-called strong tree of Great Britain and test how powerful it really was.
After Cross finished reading Mu Lin’s plan, he thought for a while and began to speak to Mu Lin, “Daniel, can I understand it this way? Country Y decided to join the new currency system created by Western European countries—the European Exchange Rate Mechanism (ERM). This was a decisive mistake. Because the ERM would no longer peg the currencies of Western European countries to gold or the dollar, but instead to each other;
Each currency was only allowed to float within a certain exchange rate range. Once the exchange rate exceeded the prescribed range, the central banks of member countries were responsible for intervening in the market by buying and selling their own currencies to stabilize the exchange rate within the prescribed range;
Within the prescribed exchange rate range, member countries’ currencies could float relative to other member countries’ currencies, all calculated based on the German mark. And Mu Lin had good relationships in this country. Before country Y joined the ERM, the exchange rate between the pound and the German mark had already stabilized at 1 pound to 2.95 marks.
But currently, country Y’s economy is in recession, and maintaining such a high exchange rate to join the ERM is extremely costly for country Y. On one hand, it will lead to country Y’s dependence on Germany, preventing it from boldly addressing its own economic issues, such as when to raise or lower interest rates or devalue its currency to protect its economic interests;
On the other hand, the ability of Country Y’s central bank to maintain a high exchange rate is also questionable. At the same time, you plan to use your strong connections in Germany to target the pound and the lira, using this move to deliver a profound lesson to these two countries that have lost their conscience, right?
Mu Lin nodded, “You analyzed it very well! There is one more thing I didn’t include in the plan, and I only thought of it after seeing you. That is, on February 7 last year, the 12 member states of the EU signed the Maastricht Treaty.
This treaty made some European currencies, such as the pound and the Italian lira, clearly overvalued. The central banks of these countries would face enormous pressure to lower interest rates or devalue their currencies. Could they maintain coordination and consistency in economic policies with economically powerful Germany? Once the markets of these countries become turbulent and they are unable to resist, would Germany, as the core country, sacrifice its national interests to help these countries?
You must remember that the relationship between countries is always about enduring interests. Our friends are all people with great power. Once they have to choose between their country and friends, they will definitely choose their country. This is an unshakable truth. Just like our relationship, as an ordinary friend, you can stand up publicly and express your anger towards the government of country Y when I encounter difficulties. This has already deeply moved me.
The funds currently under your control are no longer yours alone; they belong to your clients. If I drag you and your foundation into this murky water just for my personal vendetta, then I would not deserve to be your friend.
One thing you must remember is that the ERM will be difficult to maintain coordination and consistency due to the economic strength and national interests of each country. Once some of the “chains” that constitute the ERM begin to loosen, combined with speculators like us taking advantage of the situation to attack these loosened “chains,” other trend followers will also jump in, causing exchange rates to become even more volatile. Eventually, the reliance on the trend-following mechanism will far exceed the market’s capacity to absorb them, until the entire mechanism is destroyed. Do you understand?”
Cross nodded and carefully studied the plan again. After a while, he finally looked up, his eyes shining with determination.
“I have one last question: how much money can we currently control, and how much money can we influence? You must know that my fund currently controls only about 3 billion dollars, which is not enough to fundamentally defeat a country!”
Mu Lin raised his head and stared into Cross’s eyes for a while. In them, he saw only a determined gaze—the resolute look of a warrior preparing for battle.
From Cross’s gaze, Mu Lin understood Cross’s determination to go all out. This was both the best way to account for himself to his friend and an opportunity to make his fund famous worldwide. He had already realized that Mu Lin did not intend to reveal his strength in this sniping campaign. Therefore, he was ready to help his friend bear this “fame.”
Nodding, Mu Lin spoke, “So Cross, I want to ask, what is your bottom line? What is the minimum amount of funds you need to win this sniping battle?”
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