The exchange rate refers to the ratio at which the currency of one country is exchanged for the currency of another country. Although gold and silver were regarded as symbols of value in the whole shijie range, due to their storage and circulation problems, they were no longer suitable as tools for modern shijie transactions, and in this case, paper money guaranteed by national credit appeared.

Paper money itself is not as valuable as gold and silver, it is a monetary symbol guaranteed by the state power through coercive means, with the country's credit as a guarantee. In the beginning, paper money could still be exchanged with gold and silver, but later as more and more paper money was issued, the exchange between paper money and gold and silver was decoupled.

Countries began to issue money, and the right to issue money must also be in the hands of the government, because the essence of this act is to create wealth, and there is a special name in the economy called "seigniorage". The central bank is responsible for issuing money, and although this money is included in the liabilities part of the balance sheet, in fact, due to the inflation caused by the increase in the amount of money, some of the wealth in society is disguised by the government because of the increase in prices.

Although currency issuance is beneficial, it cannot be issued indiscriminately, otherwise it will cause hyperinflation, which is enough to bring down a country overnight.

After all, it is impossible for one country's currency to circulate in another country, otherwise the "seigniorage" will fall into the hands of other governments, which is absolutely intolerable. In this case, the exchange rate system came into being.

Before the "Bretton Woods system", there was no fixed currency as a settlement currency for international trade, and later under the negotiation and game of the victorious countries in World War II, the dollar became the designated settlement currency in international trade because it was pegged to gold, and the strength of the dollar was established.

After the seventies, the Bretton Woods system went bankrupt, and the economic community formed by European countries began to discuss the initiative to establish a European monetary system, seeking to be able to establish a new monetary system in addition to the dollar, which was the predecessor of the euro.

By October '90, Britain had announced its accession to the European Monetary System, bringing the number of member states to ten. The ten countries are France, Germany, Italy, Belgium, Denmark, Ireland, Luxembourg, the Netherlands, Spain and the United Kingdom. The combined GDP of several countries is basically representative of the European economy.

The emergence of the European monetary system has made several major European countries form a loose alliance of monetary integration, the main content of which is centered on a basket of currencies (called the European Monetary Unit ECU) composed of the member states of the European Community, and the currencies of the member countries are pegged to it, and then the currencies of the member countries are determined by the European Monetary Unit to determine the bilateral fixed exchange rate.

This exchange rate is not completely fixed, the currency exchange rate between member countries has a range of fluctuations, which is plus or minus 2.25%, and the pound sterling is set at 6% due to the large share of the UK's GDP.

In order to maintain this exchange rate regime, member states need to transfer two of their gold and dollar reserves to the Euromonetary Cooperation Fund in exchange for a corresponding number of European currency units. If a member state's central bank needs to intervene in the exchange rate of its own currency, it can use its European currency units or other forms of international reserves to buy its own currency from other countries, thereby intervening in the foreign exchange market.

Since the mark was the strongest currency in the European currency market at that time, and it was also one of the several major trading currencies in the international foreign exchange market after the US dollar, it was generally believed that if there was a sharp fluctuation between the currency of a member of the European Monetary System and the mark, it would be considered that the central bank of that country was intervening in the exchange rate.

According to the regulations, if the exchange rate between two currencies between member countries exceeds the prescribed range, then the central banks of the two countries concerned are obliged to intervene. But in fact, due to the strong position of the mark, when many currencies fluctuate to the specified range, only that country unilaterally intervenes in the exchange rate market, and Germany does not need to fulfill this obligation.

This imbalance has sown the seeds of a crisis in the interlinked exchange rate system between European currencies.

In the 90s, the Shijie landscape changed dramatically, first with the fall of the Berlin Wall, the decision of the East German parliament to be incorporated into the Federal Republic of Germany (West Germany), and the cessation of the East German government in October, which ended with the division of Germany after the Second Shijie War.

In the following year, the member states of the Soviet Union declared independence from the Soviet Union and the Warsaw Pact bloc, and the largest military bloc in history collapsed.

After the reunification of Germany, the backward East German economy seriously dragged down the economy of the Federal Republic of Germany, due to the large influx of people, the same people need the same welfare treatment and other reasons, plus the East and West Germany marks are exchanged at an extremely unreasonable exchange rate of one to one.

The German government has a large fiscal deficit.

Within the EC, policy orientations differ due to uneven economic development in individual countries. For example, at that time, the economy of the United Kingdom, Italy and other countries had been sluggish, with slow growth and increased unemployment.

In this context, the policy of the Deutsche mark, which occupies an important position in the European monetary unit, and his government has become an important weather vane.

This is what international capital is familiar with the workings of the European monetary system, and the direction of Germany will determine how they operate in the market.

For the first time, the act of attacking a country's currency will appear in the Shijie financial market, and it will be carried forward in the hands of hedge funds, and even later swept many countries.

This will also be the macro strategy of hedge funds to enter the stage of history, and burst into a dazzling light. (In order to thank the recommendation votes of more than 7,000, I added a new chapter today, and at the same time thank the book friends TomUN and Kunsha for their rewards!) ）