It is always said that the United States harvests the wealth of other countries, but how does it accomplish the harvest?

There is a saying on the Internet called the dollar tide. To put it simply, the United States releases money uncontrollably through loose monetary policy, lowers interest rates, and allows hot money to flow to various countries. After a period of time, it tightened monetary policy and stopped releasing money and raised interest rates to allow hot money to flow back to the United States. In this way, the purpose of harvesting the wealth of other countries is achieved. How does it work? It can be easily understood by giving an example.

Suppose you are an international hot money, that is, when the monetary policy is loose and the interest rate is extremely low, you borrow a large amount of money to invest in other countries. This type of person is called an international hot money. They are all very powerful characters, and today I will let you be this powerful character. You borrowed US$1 billion from the bank at an interest rate of 0.25%, which means the annual capital holding cost is only US$2.5 million. Is it so low that you want to borrow billions more? For the sake of calculation, let's assume you borrowed $1 billion.

To facilitate understanding, I assume that you came to our country with $1 billion. In reality, my country's finance is not completely open to the outside world, and foreign investment entering the country is subject to supervision. However, many other countries have completely opened their finances to the outside world, and foreign capital can freely enter and exit those countries, so harvesting is particularly smooth and easy.

According to the exchange rate of 1:7 US dollar to RMB, you exchanged 7 billion RMB. You first conducted a round of research and determined that a certain first-tier city in my country has a lot of room for growth. You did another round of research in the city and selected a high-quality community. You represent several real estate companies in this community. Let me explain in advance that the real estate companies you represent do not really want to earn commissions by buying and selling houses. After all, you don’t care about the commission for buying and selling houses. You are interested in big money, let us explain in detail how you will operate it.

You are an agent for several real estate stores, and each store has recruited a store manager and several agents. The store manager helps you manage the store, and the agent helps you collect housing information. What do you need to do first? Eat all the circulating plates in this neighborhood. Because this community is of high quality, there are actually not many real circulation units.

After a period of hard work by the store manager and intermediary, the houses for sale in this community are basically in your hands. From time to time, you will ask the store manager to put certain properties up for sale. Of course, you don’t really want to sell the house, you just want to spread the word that the price of the house has increased. The listing price is set by the store manager and can be slightly higher than the market price. One price in the morning, one price at noon, and another price in the evening. The price increases several times a day.

Everyone knows who is the most idle person in a community? That’s right, ladies and gentlemen. Especially the aunts, if you hear some news this morning, almost everyone will know it by noon, and it spreads incredibly fast. My uncle and aunt took a walk in the morning and passed by a real estate store and saw the houses in their community for sale. They took a look at 40,000 square meters. At this time, the agents enthusiastically told them that the housing prices in this community would rise sharply because there was a lot of good news. The uncles and aunties were very happy to hear this and left happily. I took a walk here specifically at noon and took another look and found that it was 42,000 per square meter. What the agent said was indeed true. I was a little excited and took a photo to post on WeChat.com. I checked again in the evening and it actually increased to 45,000 per square meter. Then I went around telling people that house prices in their neighborhood were going to rise significantly. In addition to telling the people they meet, they also have to tell it in various groups they belong to, hoping that people all over the world will know that the housing prices in their neighborhood are going to rise significantly.

Why are uncles and aunties so active in helping agents spread the news that house prices are going to rise? It’s not difficult to understand. If it were you, your house increased by 5,000 square meters in one day, assuming it was 100 square meters, that is, your assets increased by 500,000 square meters in one day. You would not be happy, and you would not want to tell others? Of course, you are a rational person, and if you are excited, you will not talk about it everywhere. But uncles and aunts are different. They are retired and have no jobs. They have nothing to do all day long. Of course, when they encounter such a thing, they have to talk about it everywhere and keep talking.

With the help of all the uncles and aunties, the news that house prices in this community will rise sharply soon spread to the ears of people who just need it. It just so happened that there was a young beauty who needed to buy a house in this community. She came to Real Estate A and took a fancy to a house for sale and consulted the agent. As mentioned above, when you list your house, you don’t really want to sell it. You have already made this clear to the store manager and agents. Therefore, the agent will tell the young beauty that the house she is interested in has been bought by someone else.

However, there is a similar house for sale, but the price is slightly more expensive, costing 50,000 square meters. The little beauty thought it was too expensive, so she left Real Estate A and consulted Real Estate B and Real Estate C, and found that their opinions were the same as those of Real Estate A. Of course, you are the boss behind these real estate properties, so it’s the same thing.

A few days later, the little beauty thought about it carefully and contacted the agent to say that she was sure to buy it. But the agent told her that house prices had increased and now she needed 55,000 square meters. The little beauty had heard the news that house prices in this community were going to rise sharply before. Now that house prices had risen again in just a few days, she panicked and immediately gave a deposit to secure the house.

Didn’t you say you won’t sell it? I said I don't care about the commission. Don't worry, selling this house is really not for the commission, but for the transaction price. The housing price of a community is affected by the latest transaction price. Although the store manager can control the listing price, the listing price is not the market price. What's the point of raising the listing price to a sky-high price? No one will buy it. But the transaction price is different. Someone really did the transaction at this price, and it is the real market price.

In this way, everyone has accepted that housing prices in this community will rise sharply. Next, someone will need to buy a house in this community, and it will be natural for the house price to rise to 60,000 or 65,000.

With the crazy rise in housing prices, more and more people have begun to join the ranks of home buyers. At this time you can start selling your property. According to 70,000, 75,000 per square meter.

You entered the market with 40,000, 45,000 per square meter, and now it is 70,000, 75,000 per square meter. Are you trying to say that I don’t want to sell now, I want to wait until it reaches 100,000 square meters before selling. In fact, no matter in the property market or the stock market, no institution can sell at the highest point. Because large-scale selling causes prices to fall, we can only withdraw slowly. After all, things are more expensive when they are scarce. Only when supply exceeds demand can the price rise, and houses are always bought at a discount.

At the same time, another reason is that the United States is going to raise interest rates, from the original 0.25% interest rate to 1.5%, which does not seem to be much. But if you borrow 1 billion, the interest will rise from 2.5 million to 15 million per year. The cost of holding funds has increased. Of course you have to return the money to the United States and return it to the bank.

There is actually another important reason for withdrawing early. The return of hot money to the United States will strengthen the U.S. dollar and cause the U.S. dollar to appreciate, while the RMB will depreciate accordingly. Why? Because there are fewer dollars in the market and more domestic currencies. If you fail to withdraw in time before the currency depreciates, you will suffer heavy losses as hot money. Just like the Turkish currency lira during this period, on January 1 this year, one dollar was worth 7.4 lira, and by the evening of December 20, one dollar was worth 18 lira.

Suppose you exchanged 100 million U.S. dollars for 740 million lira to invest in Turkey on January 1 this year. You plan to withdraw on December 20. Even if your return on investment this year is 100%, you will earn 740 million lire, plus the principal, which is 1.48 billion lire. Sorry, you can't get back $100 million, you have to lose $12 million. What to do? This is what the Turkish President wants. You cannot complete the harvest. Once you withdraw at this time, you will lose blood. This is called locking up hot money and preventing you from running away.

Assume that you have been in my country with hot money for 5 years. Let us roughly calculate how much you have earned. Suppose you buy 15 houses in that community at an average price of 40,000 per square meter. Based on the calculation of 100 square meters per suite, one suite is worth 4 million, and the total price of 15 suites is 6 billion. The remaining 1 billion is used as the store's expenditure cost.

Five years later, you sell 15 properties at an average price of 70,000 per square meter, for a total price of 10.5 billion. In exchange for U.S. dollars, that's 1.5 billion U.S. dollars. The interest of US$2.5 million per year is equivalent to US$12.5 million in five years. How much money have you made from rising house prices in the past five years?

We can even boldly imagine that the domestic currency will appreciate due to the hot economy and the inflow of hot money. From 1:7 five years ago to 1:6.3, then what you actually get is 1.615 billion US dollars.

In the past five years, what have you created for the local area with the 7 billion you have brought? There are just a few real estate stores, and the employment and salary income of about twenty people. Whose money are you making? Of course it is the money of our people.

House prices have been raised from 40,000 to 75,000, and house prices have become paper wealth. Only if it is sold and someone is willing to take over at this price can it be realized.

Did you suddenly think of something and feel that it was wrong or that there was a loophole? Of course, if you find the problem, it proves that your financial acumen is very strong. What's the problem?

How does real estate make money? Rely on commissions from buying and selling properties. The more properties you sell, the more commission you get. So how to prevent store managers and agents from working hard to increase housing prices in order to get commissions from transactions?

It’s very simple, just tie the interests of employees to the increase in housing prices. Think about it, if employees only earn commissions, the rise and fall of house prices will not have much to do with them. But you set the rules of the game and employees find a listing for sale. The house was purchased in the name of the employee, and the company gave the employee a loan as a down payment. If the down payment is 1.2 million, the employee will pay you interest at an interest rate of 5%. Don’t worry, you still make money. Don’t forget that the interest rate on your capital cost is only 0.25%. In this way, the interests of employees are directly tied to the increase in housing prices. Employees will definitely try their best to raise the price. This kind of gameplay was already played by some people in my country's real estate circle in the early years, but later various policies were introduced to target various loopholes.

Now I probably understand how the United States harvests the wealth of other countries. Of course, the property market is only one channel. There is also the stock market, or other channels. We will talk about other channels when we have time.

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