Wednesday, August 12, 2015
As China drops its currency 3.5% in two days the US dollar goes up, making American exports more expensive and of course, Chinese exports cheaper.
Global Stocks Fall Further After China Devalues Yuan
It also means that all those deals China made with countries around the world, at least those in which China agreed to trade on Yuans, just got 3.5% cheaper for China.
Currencies close to Asian markets dropped in price, meanwhile the Euro rose 1.4% against the USD. Gold and Silver just went up as well.
What’s the biggest concern? That we could see a “currency war”, in which countries are forced to drop the value of their currency to keep exports more competitive. In the case of USA, the likely outcome will be that more USD will be pumped into the market, creating inflation which will drop the value of the US to more competitive levels against the Yuan. While this would work in terms of US exports, it will also mean that a) there will be more inflation within America, hitting poor people hardest b) anything not made in China imported to America will probably be more expensive c) inflation combined with higher import prices may affect standards of living for a sector of the population.
Fernando “FerFAL” Aguirre is the author of “The Modern Survival Manual: Surviving the Economic Collapse” and “Bugging Out and Relocating: When Staying is not an Option”.