China Steps Up Devaluation Efforts

After a near immediate yuan devaluation following our last major post, it appears Chinese officials quickly became sensitized to the international concerns such a move would make. That first devaluation drew immediate attention from the international community. Such a blantant effort at undermining the economies of other countries, if continued, would have caused an international trade crisis. Additionally, devaluing ones currency is a quick way to see money roll out of the country in today's wild and woolly environment of unregulated capital flows. Although that has and will continue to happen as China's economy collapses.

Frankly, a devalued yuan is very likely whether it is via overt move by bureaucrats or a market based move reflecting fundamentals. I'm highly dubious the yuan peg can be maintained. But in the interim, never fear. Chinese officials have a different tool of affecting the same outcome - tax cuts for thousands of exported Chinese products.

That I continue to see headlines even this morning on saving the international apparatus is really quite ridiculous. Does anyone really believe global finance and globalization is going to be resurrected? The patient was on life support. I think we can now stick a fork in it. There is a way forward but it is not in the rear view mirror.