The battle between Beijing and President Trump is well chronicled. Tariffs are on everyone's mind as China and the US play a tit-for-tat game. The President started the battle by levying tariffs on certain Chinese products only to be met with with tariffs out of Beijing. Back and forth, each round adding more to the pile.
While this is capturing the headlines, what is overlooked is China's devaluation of the currency. This is a move in response to offset the impact of the tariffs on the economy.
The issue with this move is that tariffs only affect a portion of the economy while currency devaluation impacts everyone. This is something that could really harm and already wavering economy. We are already seeing diminishing purchasing power and loan repayment capacity is falling.
One major problem is that margins fall but expenses do not match up. The devalution of the Yuan will cut into the profits yet expenses like energy, working capital, imports, and other fixed costs account for 70% of expenditures. Instead of falling, many of these are rising.
The average household is further burdened by the fact that inflation appears to be rising at a pace higher than the government acknowledges. Inflation eats into spending ability if wages are not keeping pace. At present, it is estimated that the Chinese are underestimating their inflation rate by about 2%.
Control of credit can stiffle economic expansion but turning a blind eye can be destructive also.
There are numerous reasons why we should worry about China’s decision to end its control of credit growth. The government has been encouraging riskier lending by cutting deposit reserve rates and pumping liquidity into the system.
The silent bailout, which has led to the PBOC injecting hundreds of billions of dollars into the financial system, is not reducing the excess risk-taking, it is encouraging it.
This is creating a housing bubble that is larger than what the United States experienced a decade ago. The "easy credit" path which encourages excessive risk taking is pretty clear. These things tend not to end well.
China's decision to devalue the Yuan is not making it more competitive. Instead, it is only eating into household's spending ability while also creating a credit fueled bubble. Many like to point to the fact that a great deal of the money supply is gold backed. This is not quite accurate since gold accounts for only .25% of all the money supply.
While everyone has their eyes on the tariff fight between Trump and the Chinese government, many are missing the currency issue. This is one that could blow up in Beijing's face.
To read more about this, click on link:
https://www.dlacalle.com/en/china-why-we-should-be-even-more-worried-after-the-devaluation/
Trump did shake up part of China's economy in the short term but in the long run, China will bounce back, since they are dealing with the whole world not only the U.S. But I can't say the same for the States, even their own economist are worried what this means for them in the long term. Nothing good for the USD currency and I'm sure they know they can't go to war with them. So the U.S. experts (Peter Schiff and others) expect the Dollar to go down significantly even before Trump leaves the office... So If I had my savings in the USD I would throw it into gold or crypto asap...
Time will tell...
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Very Comfortable Post
everything is planned way before we can imagine. All big states are involved and take turns. us public are sheep we go merry go around
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China will eventually learn a good lesson similar to usa in 2008 but might be larger economic impact on its innocent hard working Chinese people.
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We have a lot of Boombs The China Economic, The Social Media, and in lot of more in Germany.
Gold is actually slightly larger than all the physical notes and coins of all major currencies combined.
Scroll down this page a bit, it will give you an idea how big the various markets are:
http://money.visualcapitalist.com/worlds-money-markets-one-visualization-2017/
#Trump did not start the battle. He just refuses to roll over and sellout his own people like the #Clintons. #Freetrade is not #fairtrade #infowars #informationwar #silvershield #dashy
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They might mean nothing to you or many others. They might not link to things but they are still keywords to say many things about me with the fewest characters. Thanks for the tip.
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seems like a time bomb
My flagg for comment spamming . attn @steemflagrewards
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To the question in your title, my Magic 8-Ball says:
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China is no longer a democratic country so its president, he is a supporter of kim jong that reflects his character
When was it? What government is democratic?
Yes this is a matter of worry to china, instead of concentrating on international political bitterness, the time has come that they have to concentrate on the internal financial betterment.
China is very smart country. They accept nothing from others but give everything made by them to whole world. We also buy because all their goods are much cheaper than ours. I have stopped using amazon, ebay, flipkart, snapdeal since the day i came across aliexpress and have purchased so many goods from them.
In this way they are making their economy stronger. They dont even allow facebook and google in their country. Instead they use baidu and UC browser respectively.
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That is simply not true. The whole reason China is not importing from Europe or US is because those regions have higher living standards and it is too expensive for China to import items from there. It is quite different with Africa.
How too expensive?? China is selling too much, which means its earning is also good. Alibaba group in among top 10 businesses of the world.
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They are importing a lot of German Cars (BMW, Mercedes, Audi and VW).
hmm really good man i agree with you
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Great info
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Informative, praying for world Peace...
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Political war accounts for all negative impacts on its citizen. Control over this will have appreciable effects, easing the burden of living which as it stands counters the citizens interest as had first been proposed.
Esto no va a terminar bien, solo hay que echar la vista atrás, más o menos un siglo... Llevamos el mismo camino.
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China will
Win , trump cannot because he is puppet
well you should definitely not underestimate China...
https://steemit.com/dogecoin/@amzar123/free-dogecoins-for-steem-members-action-1
If and hopefully when it blows up cryptocurrencies will reach astronomical values like never seen before..
Congratulations @finprep!
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China is one of the best place to import goods any country But.................
China is one of
The best place to import goods
Any country But.................
- businessbooster
I'm a bot. I detect haiku.
But the part of Cryptocurrency & on decision of crypto are not good
so dangerous
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trump just fights for the Interests of USA no matter how it would hurt them back.
You are strong. Whatever this crazy thing called Life throws at you, you can get through it.
It may knock you down a ways but there's always a ladder of opportunity waiting for you to climb up higher than before.
Sometimes things have to get worse before they can get better. Never give up.
If you give up, it means you never really wanted it.
They are racing for dominance so really both US and China are ticking bombs, which one has the fuse?
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Thanks for sharing, I knew there was a currency issue I just didn't realise they were being so counter-productive about dealing with it.
I guess that's what happens when banks aren't held accountable for crashing the economy!
China can't survive a war of attrition if we throw our full power at them. We have been nice and China definitely abuses its people to get an advantage in trade. I just hope we stick with it and make permanent change.
@finprep
i'll definitely read more on this!
You seem to have some legit content :O! great article!
I think it is a tiking bomb, but what its interesting is that not only China, also US... So what it will be next?
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