Monday, August 17, 2015
China's recent devaluation of the yuan has financial analyst Peter
about our the fate of our fiat currency. Indeed, he sees the move as
born of concern that its currency being coupled to the dollar was
placing China at an economic disadvantage, and hurting Chinese
trade. Indeed, he sees the global dollar rally as a bubble and this
move as an indicator of how and why that bubble might
... [W]hen the dollar starts to fall in earnest, China may not be there to catch it. This will also mean that the biggest foreign buyer of Treasury bonds will likely be sitting on its hands when deteriorating U.S. finances force the Treasury to begin issuing trillions of new bonds annually. So when the U.S. needs China's help the most, it will be unwilling to provide it.I have been wondering why we haven't yet experienced much more dramatic inflation due to the Fed's recent orgy of money printing. I hope Schiff is wrong, but feel more like I have been warned.
In the absence of a Chinese backstop that the U.S. has for too long taken for granted, when the dollar resumes its decline, the fall will be much more pronounced. This will also generate significant upward pressure on both U.S. consumer prices and interest rates that was absent five years ago, when Chinese buying provided a huge cushion to the U.S. economy. In fact, data indicates that China is already paring the amount of Treasuries held in reserve. That means a full blown dollar crisis may not have been averted, but merely postponed, with the dire warnings of U.S. hyperinflation potentially coming true after all. [bold added]
Today: Corrected capitalization errors.