Thousands of sparks

Chapter 168
There are many methods of economic warfare, the first method is just a first try - Dusand and Escobar also hope to use this to test how much the imperial bureaucracy knows about the financial crisis, and he also hopes to use this to figure out ... how fast the imperial bureaucracy can react.

Because the next second formula is hidden in the shadow of the first formula.

As long as the financial crisis is successfully triggered, the Olin stock exchange market, which is in an unregulated zone, can become the best source of income for Olin Development Bank.

There are two ways to make money when stocks are plummeting.The first is to take the opportunity to buy a large number of low-priced high-quality companies, such as companies that have their own minerals, or companies with a large number of production equipment and employees.

The second is to make money from other financial market participants, and Dusand's plan has a more accurate term-short squeeze.

The total assets of the Olympian Development Bank will reach at least 8000 million pounds after the first ceremony.The public deposits absorbed at the beginning may suffer some losses, but after the successive failures of other banks, Olin Development Bank, which maintains a relatively low interest rate, will surely be able to attract more customer deposits with hedging needs.On this basis, the Olympian Development Bank can start the second type of operation.

Shorting stocks is an arbitrage operation that has long been implemented on the Olin Stock Exchange.Traders would borrow shares of a company from other shareholders, agree on a time limit, and then sell all the borrowed shares.

To complete the short sale, the trader only needs to repurchase the company's stock within the agreed time limit and return the borrowed stock to the original holder.Of course, this stock cannot be borrowed in vain. In addition to paying a deposit, when returning the stock, the trader also needs to pay an interest to the shareholder who lent the stock.

Most of the shareholders who can lend stock are for the purpose of receiving dividends, and they are relatively insensitive to stock price fluctuations in the market.The main profit point of short traders is the difference between selling and buying, and the more the difference is, the more they earn.

The short squeeze targets this group of short traders.They must buy back the stocks of the short-selling company within the specified time and return them to those shareholders.Otherwise, the deposit of the short seller will be confiscated in full, and all the difference between the stock price on the settlement date and the sold stock will be compensated.

The plan given by Dusand is very simple and crude. Using the huge capital advantage of Olin Development Bank, find a stock that is the most short-sold in the market, and then buy their stock with all the money-buy as much as you can .

If you buy a large amount of a company's stock, the price of the company's stock in the market will start to skyrocket.Short sellers will soon find that their attempts to sell short have failed, and they have begun to suffer huge floating losses.

When the Olin Development Bank finished their short squeeze, it didn't matter when exactly they planned to exit.All the company's stocks in the market will be bought by Olin Development Bank, and these short sellers have no chance to buy back from the market to complete the last step of the transaction - buy back the stocks and exchange them for the stocks needed by the lenders.

According to the trading rules of the Olin Stock Exchange, these short sellers first need to pay a margin equivalent to 90% of the current market value of the shorted stock. All the price difference when leaving, and the security deposit must also be fully handed over to the lender.

In other words, a short squeeze can only earn an infinitely close to 100% profit at most, but the risk of loss is several times or even dozens of times the principal of the short seller.

Under such unfavorable trading conditions, short sellers are still determined to make profits in this way, because they are confident that they will not be "maliciously squeezed".The forces behind them are strong enough that no one who doesn't have good eyesight will do anything to them.

However, the insurance measures based on off-the-market moves have a huge impact on the entire financial system.If the other party uses off-the-market tricks to try to avoid the losses caused by the short squeeze, it will have a fundamental impact on the short-selling mechanism of the entire financial system.All other market traders have to think about whether my counterparty has a stronger background than me, and whether I may be killed by the other party's off-the-market tricks when they start trading.

The financial system and financial transaction behavior are essentially a castle in the air backed by confidence.Only when all participants recognize and believe that the market is fair—at least relatively fair—the whole market will be able to function.

This is the goal of Dusand's second style. He wants to make these market participants so painful that they will not hesitate to use off-market tricks to control losses.And as long as they dare to control the loss, and with some propaganda from the Central Special Branch, the key to Olin's financial system will be completely abolished.

Either make another fortune from the empire's financial system and bring down a group of super traders who dare to short...or let the entire empire's financial trading system fall into disintegration.

This is the power of "confidence".

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The two-step plan formulated by Dusand was formulated on the premise of "destroying the imperial economy as much as possible" and "guaranteeing the safety of the Olin Development Bank as much as possible".All actions of the Olympian Development Bank are based on the premise of compliance with the relevant laws and regulations of the empire.Unless His Majesty the Emperor personally came out to express his "imperial intention", the Olympian Development Bank could at least maintain a very safe position.As a legitimate financial market participant, the Olin Development Bank can act like a poisonous thorn, threatening the financial security of the empire at all times.

If His Majesty the Emperor really couldn't think about it that much, it would be considered as being completely ambushed by Du Sande.The "absorbing public deposits" set at the beginning was not only for the rapid expansion of Olin Development Bank, but also for other small and medium-sized commercial banks to follow up.

The fundamental purpose of absorbing public deposits is to blackmail or deter the empire and even the royal family.The bigger the Olympian Development Bank is and the more public deposits it absorbs, the more carefully the empire has to deal with this poisonous thorn - if it rashly deals with the Olympian Development Bank, a large number of nobles and middle class will lose their deposit.Those who lost their savings will of course resent and even hate the culprit who caused them to lose their money.

Even the Imperial Emperor still needs to be wary of such widespread resentment.And with the support of Central Teco, of course Olin Development Bank will not just wait for the empire to clean up.

Dussande has no definite ideas about this, but some rough ideas exist.For example... to pay more than half of the shares of Olin Development Bank to a certain Grand Duke Horn who wants money and life.It will be interesting for His Majesty the Emperor to look at his grandfather at that time, right?

"This plan is good, and it is indeed quite powerful." Schultz, who was familiar with Grand Duke Horn, quickly saw the power of this series of measures. He nodded appreciatively and asked, "When will the plan be implemented? To build a bank that can attract deposits from the public, you must first have a large initial capital.”

"This has been resolved." Lorraine said with a smile, "Newsal sent 200 million pounds in cash, and these funds are our weapons."

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Not everyone in Neusal, at least at the highest levels of governance in Upper Albyn, agreed with Dusand's offensive strategy.At least Duchamp, who had returned to the ruling class in Newsale, disagreed.

"That's 200 million pounds." Duchamp frowned at Dusand at the dining table, "This money is even enough for us to carry out an armor enhancement modification for all the battleships."

Armor-enhancing the capital ships of the Newsail Navy is a plan that Duchamp has been pushing full steam ahead of late.According to the current answer given by the Internal Affairs Committee, the armor enhancement modification can be completed within five years at the earliest, and the total cost is about 190 million gold pounds.

In fact, this armor enhancement modification is not a particularly high-tech type in nature-in fact, this modification work costing 190 million gold pounds is nothing more than riveting another layer of about three layers to the core area of ​​the battleship. Ten centimeters thick armor plate.

The most fundamental reason affecting the execution speed of the armor enhancement plan is lack of money.After repeated calculations, the Internal Affairs Committee gave a reply that the plan would be implemented in five years, and 40 gold pounds would be allocated in the first year.

This made Duchamp very dissatisfied, but the greater dissatisfaction came from the contrast.Why do you have to wait five years to strengthen the capital ship, but you have to spend 200 million pounds in one go in Olympia Bank?
"The need to add armor to our capital ships is not so urgent." Dusand said while eating breakfast, "Spending 200 million can slow down the development of the empire, and may even plunge them into civil strife. This strategy It is the most profitable one at present..." He stopped the knife and fork in his hand, looked at his father and asked, "Even if it costs 400 million gold pounds, the armor protection transformation of all capital ships will be completed within this year... then Can you stop the Imperial fleet?"

After this question caused Dushan to fall into silence, he pondered for a while before saying, "If it is the main force of the two imperial guard fleets, we can buy at least two weeks."

"Fight for two weeks, and then?" Dusande didn't show any satisfaction or dissatisfaction with his father's answer, he just asked very calmly, "After two weeks, can the fleet counterattack to Olin? Or two weeks?" After that, all the ships of the garrison fleet were destroyed, and Nusaar has since become a target for the undefended Imperial Guard fleet?"

It is of course impossible to counterattack to Olin.The entire main force of the two imperial guard fleets, which is three times the size of the Newsail Garrison Fleet.Leaving aside the gap caused by the service life of the main ships of the two sides, even if you just look at the number, the two imperial guard fleets can completely wipe out the New Salle fleet with a collision.

Duchamp was silent for a long time, and then started to eat the fried egg in front of him again, "I am a soldier, and my job is to use all means to resist and destroy the enemy. Others... that is what you politicians need to consider gone."

"So, please trust my judgment." Du Sande also continued to eat the buttered potatoes in front of him, and he said while filling his stomach, "Spending 200 million gold pounds to interfere with the empire is the best we can do now. Good choice—besides, it’s not as simple as spending the 200 million gold pounds, maybe we can earn tens of millions of gold pounds from the empire in the end.”

(End of this chapter)