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The nature and development of foreign exchange

What is foreign exchange control?


Foreign exchange control: refers to the restrictive measures imposed by a government on foreign exchange in and out to balance the balance of payments and maintain the exchange rate of the national currency. Also known as foreign exchange management in China. An international trade policy that restricts imports by a government that restricts international settlements and foreign exchange transactions through decrees. Foreign exchange control is divided into quantity control and cost control. The former refers to the direct restriction and distribution of the amount of foreign exchange trading by the State Administration of Foreign Exchange, and the purpose of restricting exports by controlling the total amount of foreign exchange; the latter means that the State Administration of Foreign Exchange implements a complex exchange rate system for foreign exchange trading, using the cost of foreign exchange trading. The difference is to regulate the structure of imported goods.

The nature of foreign exchange control

  1. For Western countries, foreign exchange control is a tool for their foreign economic policy.
  2. For developing countries, foreign exchange control is a defensive measure to prevent monopoly capital from invading and safeguarding the economic interests of the country.

Most developing countries are relatively backward, foreign exchange funds are insufficient, the international balance of payments is deteriorating, and the debt burden is heavy. Therefore, foreign exchange control is to stabilize its local currency, ensure the independent development of the national economy, seek balance of international payments, and make limited foreign exchange funds as free. An important tool for outflow.

The emergence and development of foreign exchange control

Foreign exchange controls began during the First World War. At that time, the international monetary system was in a state of collapse. The United States, France, Germany, Italy and other participating countries all experienced huge international balance of payments deficits. The foreign exchange rate of the local currency fluctuated drastically, and a large amount of capital fled. In order to carry out wars on foreign exchange funds, slow down exchange rate fluctuations and prevent domestic capital outflows, the participating countries can celled the free trade of foreign exchange during the war, prohibited gold exports, and implemented foreign exchange controls. During the period of the world economic crisis from 1929 to 1933, many countries that can celled foreign exchange controls after the war re-implemented foreign exchange controls. Some countries that implemented the gold nugget and gold exchange standard system also implemented foreign exchange controls. In 1930, Turkey first introduced foreign exchange controls. In 1932, more than 20 countries including Germany, Italy, Austria, Denmark, and Argentina also implemented foreign exchange controls.

After the outbreak of the Second World War, the participating countries immediately implemented comprehensive and strict foreign exchange controls. In 1940, only 11 of the 100 countries and regions did not formally implement foreign exchange controls, and the scope of foreign exchange control was wider than before. In the early post-war period, Western European countries continued to implement foreign exchange controls based on the prevailing “dollar shortage”. In the late 1950s, the economies of Western European countries recovered and the international balance of payments improved. Since 1958, countries have resumed currency convertibility to varying degrees and lifted foreign exchange controls on international trade balances, but foreign exchange for other projects. The control remains unchanged. In 1961, most of the IMF member states stated that they were obligated under Article 8 of the International Monetary Fund Agreement to avoid foreign exchange restrictions and to implement currency convertibility. However, in the 1990s, most countries still implemented foreign exchange control to varying degrees. Even countries that nominally completely abolished foreign exchange controls often indirectly use non-trade income or non-resident capital account revenues and expenditures.

How to improve Bitcoin

The improvement of Bitcoin’s ecology includes two aspects, one is the improvement of infrastructure and the other is the improvement of application scenarios.

I think it is mainly a node problem about Infrastructure. until now there are still many limitations in current hardware, if you have a wider network and a larger hard disk, you can think outside Thinking framework and think about it. Bitcoin core should be deployed at a finer granularity in a cloud network, there is no need to deploy a personal computer or mobile phone in the mobile terminal. For example, block chain router, he can achieve super node and transaction confirmation calculations into one, it is as simple and convenient to design the transaction settlement network to find wifi. For another example, the Internet of Vehicles is now very hot in the investment circle, because the car will inevitably become the information terminal for future mobile. A car can also be a super node or a private node of a block chain. When it comes to such a state, digital finance is really like water and air, everywhere, the richer the nodes, the time lesser when the bitcoin transaction broadcasts confirmation. The shorter, the digital currency can only be developed to this stage, in order to achieve the goal of “making freedom become freedom and wealth become wealth” as stated in the CCTV feature film “Currency”.

Nowadays, many people are studying sidechains. The main reason for the research on sidechains is that the amount of information that Bitcoin blockchain can carry is too small. As the ecosystem of Bitcoin itself is perfected, this problem will certainly be solved. Of course, the agreement also divided into many layers, the development of sidechains can become a higher-level protocol that will enrich Bitcoin’s flexibility to solve real-world problems.

With the improvement of the application scene, the entrepreneurs of the currency circle are making various attempts, games, cross-border online shopping, gambling, equity crowdfunding, etc., and there are many pain points in these scenes. Games: The issuance of game currency and cross-border circulation will definitely change the current format of virtual commodity trading; cross-border online shopping : cross-border redemption issues, especially for service-oriented commodities, such as copyright trading market, creative market, design market, outsourcing service market Etc., can promote the evolution of payment, there must be a blind spot in the global payment network, for example, designers in small African countries can directly serve a cafe in China through such a payment network in their own home; True fair, probabilistic, non-cheating lottery; equity crowdfunding: the company’s stock mark and no fraud, stocks are easier to virtualizes transactions, bitcoin unforgivable mark itself has very large practical value, theoretically The smallest unit of bit currency “Cong” can mark any kind of assets, including: simple and fast multinational signature, international contract signing, judicial deposit, etc. In the financial field, paying a Cong can become an angel investor, a person’s company It can also become a public company, all of which are possible in the Bitcoin network…

Can digital currency become a national strategy?

What role does digital currency play in imagining national strategy? When Silicon Valley prophet Kevin Kelly came to Beijing headquarters in 2014, he said, “I think the Chinese government may ask for an (official) digital currency within 15 years because it provides open and detailed transaction records. Of course, this digital currency may be similar to a bank, not a bitcoin.” There is a consensus that many people agree that Bitcoin still has the potential to become a phased product, but Bitcoin technology will certainly develop in the long run. Does the government have such a claim? Absolutely there is, of course, it will certainly not be a form of bitcoin, more embedded. At the national level, the country does not need digital currency such as P2P, anonymity, anarchism, and risk of money laundering, and these characteristics are not inherent properties of Bitcoin. The essence of blockchain technology is that it is an open and transparent transaction record. We removed the anonymity of Bitcoin, extracted the p2p general ledger technology, password verification technology, and put it into a subdivided sample to see if it can solve some real problems. For example, financial transfer payments, project-specific fund management issues, pre-programmed settings are definitely more efficient than post-special audits. It can also better solve the problem of the game between the local government and the central government. When running the money, the space for rent-seeking will be compressed. For example, solving the problem of social security medical insurance, the idea of ​​using digital currency for fund management under complicated conditions can greatly improve efficiency. Everyone is in the scene of our medical insurance reimbursement, various diseases, various medicines, our country’s management system can not meet this complicated condition, can only continue to recruit people to carry out human governance, artificially created inequality, leading to extreme Inefficiency and social injustice. For example, the central bank’s currency control of banks, using digital currency can also achieve more efficient and accurate management, do not worry about out-of-control in vitro and off-balance sheet issues in the bank’s statement of accounts. Many of our macro-decisions are based on erroneous economic data. It is not said here that it is the most hated thing ,so many economists hate that. Let us think more farther. The original top-down administrative management mechanism is difficult to adapt to the ecological environment in which all things in the world are freely connected. The systems, policies, and rules of our country are all based on administrative power. Under the spur of the implementation of such a system, the underlying innovation is very small, and the time of its own evolution is very long.

Speed up the process of globalization

Even in the farthest places on the earth, the time of information dissemination only takes 0.8 seconds. The emergence of the Internet has flattened the world, and the advantage of information symmetry is no longer a patent of a few people. The emergence of Bitcoin can make the world more flat. It is too valuable to let human beings around the world recognize a monetary standard and financial agreement regardless of country, culture, race, and language. By establishing an open, transparent and verifiable system, everyone can participate in simple game rules and make it a global currency. Only then can the Earth be eligible to participate in interstellar competition.

Three major foreign exchange markets

The foreign exchange market is a system for foreign exchange trading and foreign exchange speculation.The foreign exchange market refers to financial institutions such as banks, proprietary traders, and large multinational companies. A trading market connect through an intermediary or telecommunications system that buys and sells in various currencies. It can be tangible—such as a forex exchange ,it also can be an invisible—such as an interbank foreign exchange transaction traded through a telecommunications system. With the increasing electronic and networked, foreign exchange quotations, inquiries, buys, sells, deliveries, and liquidations are replaced by computer networks. So we say that the current foreign exchange market is an invisible market and a paperless market for computers.

At present, there are about 30 major foreign exchange markets in the world, which are spread across different countries and regions on all continents of the world. According to the traditional geographical division, it can be divided into three parts: Asia, Europe, North America, etc. Each market has its own fixed and unique characteristics, but all markets have commonalities. Each market is separated by distance and time, and they interact each other and are independent. Once a market is open every day, orders are passed to other foreign exchange markets, sometimes setting the tone for the opening of the next market. These foreign exchange markets are centered on the city in which they operate. and radiate to other countries and regions around them. Due to the different time zones, the foreign exchange markets are open to each other during business hours, and they are connected to each other through advanced communication equipment and computer networks. Participants in the market can trade around the world, the flow of foreign exchange funds is smooth, and the exchange rate differences between markets are extremely small, forming a unified international foreign exchange market that operates globally and operates around the clock. The three major foreign exchange markets are: Tokyo foreign exchange market, London foreign exchange market and New York foreign exchange market.

  • Tokyo foreign exchange market

The Tokyo market is Asia’s largest foreign exchange market, but it is the smallest of the three foreign exchange markets. Its market has to some extent continued the trend of the London and New York markets the previous day. In addition, during this period of time, the yen will also be affected by the Japanese economic elite’s comments on the exchange rate and the release of important data on the Japanese economy.

Traders in the Tokyo foreign exchange market are foreign exchange banks, foreign exchange economists, non-bank customers and Japanese banks. Trading time is 8:00-14:30 (Beijing time). The trading volume of the Tokyo foreign exchange market is relatively single, mainly in USD/JPY and EUR/JPY. In the transaction, the general market is relatively flat, but in the future transactions, we must pay attention to the speculative role of Japanese exporters. At this time, the yen has experienced significant fluctuations in the foreign exchange market. Example: On Wednesday, October 23, 2002, USD/JPY was suppressed in the Tokyo market and quickly fell from 1 USD = 125.26 yen to 1 USD = 124.00 yen.

  • London foreign exchange market

London foreign exchange market is the world’s old financial center. It is also the earliest place for foreign exchange trading to start. Its long history has led banks to habitually choose to trade bulk commodities during the opening hours, so the drastic fluctuation of the foreign exchange market has also begun. In other words, if investors choose to conduct foreign exchange transactions during this time period, it is a good time. The exchange rate will also be affected by the news during this time period.

  • New York foreign exchange market

The New York market rose during World War II, but it is the fastest growing financial market. Since the United States is the center of large-scale global capital flows, it has a great impact on the currency market. Some commodity transactions in the London market will wait until the opening of the New York market. As the most active foreign exchange market in the world, investors are more inclined to trade during this period in order to make more profit.

Participants in the New York foreign exchange market are branches of large commercial banks and foreign banks in the United States , famous Chinese institutions include Bank of China New York Branch and some professional forex brokers. The New York foreign exchange market is not only a domestic foreign exchange trading center, but also an important international foreign exchange market. Trading hours are from 22:00 Beijing time to 5:00 the next day. Due to the overlap between the trading hours of the New York market and the London market , the market was the most active during this period, with the largest volume of transactions and a large proportion of market volatility.

Prime time of trading

There is no foreign exchange exchange in the foreign exchange market, so there is no concept of opening and closing, it is mainly based on the normal working schedule of local people. The peak of the general transaction will appear between 9:00-17:00 on the local normal working day. Therefore, relatively speaking, the local currency is active during the trading hours of the local market. Among the three major foreign exchange markets, the London and New York market hours are the most intensive. Therefore, during the period when the two major trading markets in London and New York coincide (20:30-24:00 Beijing time in summer time), the market is most volatile, which also provides investors with greater profit opportunities for entering the market.

Non-prime time of trading

Friday: Due to some unexpected news that may occur on the weekend, in this case, the risk of trading in a position over a week is higher.

Holidays: Some banks may be closed, trading volume is light, the price fluctuations are small at this time, the profit margin is not large, it is not suitable for trading.

Weekend: The foreign exchange market will never have a strict closure, but in fact all major banks and traders are closed on weekends. The mobility on the weekend is so small that it does not offer traders many trading opportunities. When some basic news is announced on the weekend, some price changes may occur, but basically the movements of the currency pair are negligible and the trading volume is very small, which makes the execution of the transaction difficult. Therefore, the FXCM trading platform will close at 5 pm EST on Friday and reopen at 5 pm EST on Sunday.

Major event occurs: If the non-agricultural data is released and the US presidential election and the prospects for price movements are uncertain , the risk of entering the market is greater.

In the foreign exchange market, we are the smallest traders and participants. In foreign mature markets, foreign exchange trading also includes middlemen, brokerage firms, central bank international companies and some fund institutions.

Intermediary refers to the main commercial banks. In the general market, their quotes are exchange rates between currencies, and other participants in the foreign exchange market usually ask these commercial banks for the exchange rate they can provide. The brokerage company cannot directly report its own exchange rate. They pass the intermediaries’ quotes to other market participants. The brokerage company will only open the inquiry party after the determined commercial commitment. The transactions completed by the brokerage company account for 40% of the total trading volume of the foreign exchange market. International companies are often internationally renowned multinational companies with subsidiaries throughout the world. Participation in the foreign exchange market is an integral part of their international trade. Some companies also have their own foreign exchange trading rooms, specializing in foreign exchange transactions.

The current foreign exchange market can be called the global foreign exchange market, because the global time difference connects the business hours of the foreign exchange markets around the world, and can be traded without interruption. This formed a unified big market.