The trade deficit for years can only be made up by foreign investment? Mexican financial crisis

1. Deficit can be understood as a kind of debt, and you have not given money for other people's things. Mexico has a continuous deficit, which means that Mexicans buy foreign things every year without giving money. The inflow of foreign capital is equivalent to foreign money lent to Mexico, and Mexicans use this money to pay back the money they buy things.

Once foreign countries do not lend money to Mexico, Mexico will have to buy things with its own money, which is called the national foreign exchange reserves.

2. Foreign capital entering Mexico must be converted into Mexican currency, and foreign capital entering Mexican ** banks has become foreign exchange appropriation, and Mexicans use foreign exchange appropriation to buy things. The influx of foreign capital into Mexico will lead to an increase in the share of foreign exchange.

3. The foreign exchange deficit is generally due to the fact that imports are greater than exports, which may be due to the fact that the national strength is not strong, and it has premeditated to become a dumped country of a country's goods after signing an unequal treaty.

Not too concerned about America's backyard

I will briefly explain my understanding, I hope it will be helpful to you

There are two simple situations in which national debt arises

1.The country's economy is not sound.

The absence of a sound industrial economy has led to a large proportion of goods being heavily dependent on imports

Let's take a simple example

A family of 7 people (Mexico) Parents work 4 old and 1 elementary school Spend 1000 per month Parents salary is only 900

So what about a gap of 100? You can only borrow from a neighbor, but this neighbor (the United States) is not kind, and there are conditions for borrowing money, and you have to charge interest (equity in some properties, or charge interest on your loan, or ask you to accept his so-called ** financial policy).

What should I do if the family wants to eat? Grit your teeth and borrow it

Since there are already structural problems in the economy, these structural problems are exacerbated by the current debt

This has led to a lifetime of slaves to debt

In 1998, Russia, which is militarily stronger, directly said, "Banker, I owe money, I'm sorry, I won't pay it back."

If it is not strong, it will be devalued, like South Korea, the won has been flattened a lot in the Asian financial crisis, so that the dollar of Americans can increase their super purchasing power and consume their country's resources, and there is also a demographic dividend

To put it bluntly, all the military and diplomatic means used by the United States are nothing more than to maintain his vampire teeth

2.This is the example of the United States

Hope mine is helpful to you.

Good luck

After reading it, I won't analyze the problem!! Someone will analyze.

If you're really interested in this!! I highly recommend you to watch Krugman's "Depression Economics", not thick. There are some in-depth analyses of your question from the background, etc.

There are two main reasons for the outbreak of the currency crisis in Mexico. The first is that since 1990, a series of changes have taken place in its economy: first, high interest rates have attracted a large influx of foreign capital, with an annual inflow of $25 billion to $30 billion; secondly, the gradual and sustained rise in the real exchange rate has undermined the competitiveness of its exports, resulting in a balance of payments current account deficit of about $23 billion per year (7% of GDP); Thirdly, the domestic savings rate has fallen sharply, from 19 per cent in 1990 to about 14 per cent in 1994, while domestic investment and productivity have stagnated, with economic growth of only 2 per cent.

The second is that Mexico's exchange rate stabilization policy, which is one of the measures to control inflation, has been implemented for too long, which makes foreign investors feel that this is an implicit "exchange rate guarantee", which reduces risks for them, and thus attracts an influx of foreign investment. However, most of the foreign capital is used to increase consumption, and investment and foreign trade exports have not increased significantly, which makes the entire economy overly dependent on foreign capital. Once the inflow of foreign capital slows, foreign exchange reserves are greatly reduced.

Once foreign investors perceive it, they begin to repatriate the funds invested in **** back to their home countries, which triggers the crisis.

Lessons from the Mexican currency crisis.

Appropriate flexibility should be given to the exchange rate, and foreign capital should not be used to support the exchange rate of the national currency for too long.

In the context of relatively open and free capital flows, monetary policy itself is often not effective enough. This is because high interest rates will attract a large inflow of short-term capital and fuel inflation. Contractionary fiscal policies, such as spending cuts, subsidies, and policy loans, will be more effective in controlling inflation.

Financing consumption with foreign capital is not sustainable. In East Asian countries, most of the FDI inflows are directed to investment, which increases productivity and increases the ability to export and repay at a later date.

Foreign portfolio investment is far less stable than foreign direct investment. The former refers to foreign investors' investment in the market, bonds, which are highly speculative, and foreign institutional investors (common, pension, etc.) will transfer funds once they have a stir. Therefore, there are more advantages to attracting FDI.

Because most of the direct investment is invested in industry, its goal is to obtain a higher rate of return or a higher market share in a longer period of time, and the speculation is less and the stability is higher.

Mexico is largely dependent on the United States for its economy, and the United States accounts for a large portion of Mexico's total exports, and the solution is unknown.

He has only controlled a few dollars and how much capital can be influenced, and there must be an environment for this to be achieved, and now we are in the midst of a financial crisis, globalization, and even a global economic crisis, and under such conditions, the flow of large capital has been hit, so that it has no basis for making waves. Mexico's financial turmoil was triggered mainly by the imperfection of its own economic structure, which relied heavily on the American manufacturing industry, so that it was quickly affected by the US financial crisis, which made people lament that another new economy was hit hard. I would also like to say that the most important thing now, and what we ordinary people can do, is to spend a lot of money to help small and medium-sized enterprises survive, so that China will really survive, and this truth is clear to everyone.

No. Mexico's main economy is still heavily based on U.S. OEMs.

The first is to produce a more serious bubble economy, which then arouses the interest of international hot money, such as Soros's quantum** sniping on the Mexican currency, coupled with the fragility of the Mexican financial system, which was forced to open the financial market prematurely and the economic bubble burst.

The country's financial system is fragile.

International hot money is making waves.

The financial crisis will not only affect the United States, but also affect the world, at this time, although the United States is in a bad situation, but other countries are not better, and may even be worse, then it seems that the dollar will be a good investment product, other currencies will naturally be sold, and they will depreciate, this is not Mexico's problem, except for Japan, non-US currencies are all depreciating against the dollar, and the RMB is an exception.

Because Mexico is very dependent on the economy of the United States. How to say ......For example, if Mexico wants to make things in exchange for American goods, and the financial turmoil in the United States causes an economic recession and a large decrease in demand, then Mexico can exchange less things, and the country will not be able to follow suit, and it will depreciate.

All economies that depend on the United States will have their currencies depreciated.

The financial crisis will obviously affect a country's exchange rate, which has a great impact on the settlement of foreign-funded enterprises in the currency of other countries.

Many companies in the United States have frozen hiring due to shrinking business, and Boeing is going to lay off further workers. As China's largest partner, the weakness of the real economy of the United States has directly caused China's export enterprises to face a severe situation, and the first to bear the brunt of the impact is the financial, investment, international, real estate, automobile and other industries.

At this time, it is an important period for college graduates to find jobs, and it is difficult to see how much impact the financial crisis will have on the employment of college students, but at present, it can be preliminarily judged that with the increasing spread of the impact of the financial crisis, first of all, the business of multinational companies and outsourcing companies will shrink, which will reduce the number of employees and freeze recruitment; Secondly, domestic manufacturing and export-oriented enterprises that provide parts, raw materials, and semi-finished products for foreign industries will also be affected.