China "Weaponizes Yuan" - Weakens Fix By Most Since 2016

On the heels of its 'stealthy' easing.. and not so stealthy:

The PBOC just lowered the ax on the Yuan Fix - slashing their reference rate by the most since June 2016.

 

Offshore Yuan is tumbling to new cycle lows after the fix...CNH is down over 1250 pips this week - the biggest weekly devaluation since August 2015's plunge.

President Trump is gonna be pissed!!

Will China's chaotic capital markets ripple across the world?

Yen just snapped stronger...

The Indonesian Rupiah tumbled 0.5%, and gold is falling...

As we concluded previously, so how long before the trade war, which is already shifting to a currency war as a result of the recent record devaluation in the yuan, morphs into a central bank war and a renewed race to the bottom between the world's two most important economies? .. or worst still as Bannon suggested, a kinetic war.

Russia is an annoyance. China is our great challenge. Russia's economy is the size of Texas or New York State? It's got lots of nuclear weapons...but in today's warfare...nuclear weapons are taking a less important role. Trump is trying to end the Cold War and the Korean War...and all he is getting is grief from the globalists.

And that's a huge problem, because not only are we adversaries with China, we are at war with China, Bannon said.

We're in a war with China. Ray Dalio tweeted the other day. There's three types of war: information war, economic war, and guns-up kinetic war. They've been at war with us for 25 years. Many people in this room have exacerbated the rise of China."

Pushing back against the notion that Trump lacks grand foreign policy vision, Trump, like Reagan, is trying to build a foreign policy behind American assertiveness and optimism. Furthermore, the notion that China has advantages over the US in a trade war is laughable; the US can - and will - win, Bannon said.

If they devalue their currency they're just going to flood more dollars out. That's what their own people think about their economy. We allowed them to take the South China Sea. Donald Trump is not going to back off this. Donald Trump is not going to blink. Victory is when they give us access to their markets.

This trade war is going to end in victory and what you're going to see is a reorientation of the entire supply chain out of China.

But, we remind readers that 'hope' is not a strategy.

Comments

Uchtdorf max2205 Thu, 07/19/2018 - 22:14 Permalink

The thing all Americans must realize is that those 1 Billion plus Chinese eat. There is a huge chunk of GDP being created just so they can feed themselves. The world fools itself into thinking that the US has the highest GDP. That's simply not true now that China produces electronics and plastics and computers and iPhones and clothing and rare earth metals and cars, cars that are improving as time goes by, and they feed themselves. That's a massive amount of GDP and money exchanging hands. The IMF loves China. The US has a low labor participation rate and a lot of out-of-shape baby boomers who produce very little. I'm sorry, my fellow Americans, you've been duped by the oligarchs of Wall Street and the lying politicians of Wash DC. Even if Trump weren't a NWO puppet, he could not MAGA. The deck is stacked and the hand is dealt. Prepare accordingly. (The Chinese own a lot of precious metals. Maybe you should include some of that in your preps...along with some less precious (for now) metals.

In reply to by max2205

Balance-Sheet Uchtdorf Thu, 07/19/2018 - 22:25 Permalink

Then you and your Chinese bosses should be brimming with confidence over a struggle that in retrospect will be easily won! In reality the greatest enemy of the Chinese Communist Party will be the 1.4B people of China who realize that their ship is not ever coming in and after all how could any political party arrange 1.4B winners.

Actually I hope all goes well in China but they are in a very tight spot they have been making for centuries. They had everything 500-600 years ago and they just turned way from the World they felt they could afford to ignore.

This was a grave cultural error and has set all this in motion. Fourteen years of prosperity is a thin hand to bet the homeland on.

In reply to by Uchtdorf

unklemunky Uchtdorf Thu, 07/19/2018 - 22:33 Permalink

Uh, who gonna buy all them things when us don’t? We are numero uno mofo. They have a massive population of indegent people who couldn’t afford two rolls of toilet paper. You also forget they do not have a market economy. Sorry, but sellers need buyers, and they are fucking with their biggest customer. China loses this thing big time. Bank on it. If not, why devalue their currency to double shit status.  The chinese fuckers who borrowed in dollars are going to get bent over backwards. Oh, and all of those treasuries they own are going to be smashed to shit as we put the chinks off at a huge discount from our pumped up dollar.  This is a Hail Mary. The chinks are freaked.

In reply to by Uchtdorf

Uchtdorf unklemunky Thu, 07/19/2018 - 22:48 Permalink

They have already turned West to Eurasia and are revolving away from the US. They are building a lot of infrastructure all the way to the Mediterranean Sea. I think they will give the US a good run for its money because the elites intend to destroy the last bastions of liberty in the US. It's almost 2nd Amendment time. 

Further, haven't you heard about China's military being in Africa to maintain their many investments there?

So China has markets that are developing and China can get the resources it needs. When the US$ loses its world reserve currency status, we will be in a lot worse shape than we are now.

In reply to by unklemunky

Just Another V… Pinto Currency Thu, 07/19/2018 - 22:46 Permalink

Does the Fed realize that RAISING RATES CAUSES ..............

HIGHER INTEREST Payments for everyone, not to mention the cost on a 20 Trillion Dollar Deficit................

A STRONGER DOLLAR  that Makes US goods more expensive,  and more difficult to sell internationally.....

ALL the while the CHINESE CURRENCY is being DEVALUED big time..... Go Figure .

 

THE FED HAS RAISED RATES about TWO too many times, at least,  at this point.  

IT IS NUTS. 

 

WHEN THE ECONOMY CRASHES THEY CAN DO ANOTHER  Big experimental QE ..  Just like the last time. .

It gives folks at the fed something to do.    Bail out the Banks and Financial Institutions. ....Sick...
 

Fed types in those Insulated Towers with all the over analysis, paralysis, and computer software

can be a real disconnect when any assumptions or projections are incorrect.....

But we all know they never make any mistakes..../S.

 

In reply to by Pinto Currency

Just Another V… tmosley Thu, 07/19/2018 - 22:55 Permalink

Did Any economy ever crash because of debt problems and high interest rates ????

I don't think so,  I know so.

 

Maybe we should to go back to the old logic, eh ? 

and send all our jobs overseas, 

import everything from overseas,

send all our manufacturing overseas,

and blindly hope it is not a formula for failure in the long run. 

In reply to by tmosley

Endgame Napoleon Just Another V… Fri, 07/20/2018 - 00:07 Permalink

The US produces few goods that require a lot of human labor, and it is not due to a small working-age population. The Millennials are a bigger generation than the Boomers, but the Millennials cannot afford to work for $1 per hour, like the Chinese, not unless .gov supplies them with free rent, feee EBT groceries and up to $6,431 in refundable child tax credits as a reward for part-time work that keeps them under the income limits for welfare and womb-productive sex in single-breadwinner households. NO, the lucrative-for-elites practice of sending  production to China has NOT reduced the cost of living in any signifiant way for most Americans. It just build up China, while giving dual-high-earner parents, keeping two breadwinner jobs under one roof, some Made-in-China stocks in which to sink their extra money. 

In reply to by Just Another V…

TheJohnnieWalker_Put arbwhore Thu, 07/19/2018 - 22:25 Permalink

We're missing the most important element.

Precious metals "normally" move/track inversely to the dollar. Well, PM's sold off huge mornings, today Silver> Gold. Biggest God damn move since July 2017.

Now this evening, the Yuan sells off and the Dollar spikes. Is the PRC central bank selling short term PM futures against a rise in the dollar, rather than Western central banks as suspected? The move was huge!

Inquiring minds want to know. Where the hell is the coverage on this?

In reply to by arbwhore

GIG61 mrjinx007 Thu, 07/19/2018 - 22:21 Permalink

When we were in the crash in the first year, Dr. Peter Morici Conservative) and Dean Baker (liberal) were together on a program and while acknowledging they were as far apart in their economic theory as the east is from the west, they said there was one point they agreed on wholeheartedly.

We ourselves could fix the whole problem here in the US for the working man.

 

Fix the exchange rate, and we could do it unilaterally.

 

Would those who understand this stuff explain to me why this would be a good or horrible idea and what the outcomes could be today?

In reply to by mrjinx007

Endgame Napoleon GIG61 Fri, 07/20/2018 - 00:15 Permalink

How is this going to fix the rent that devours more than half of earned-only income and the smorgasbord of low-wage, temporary, part-time and churn jobs for everyone but dual-high-earner crony parents on frequent babyvacations and single moms with welfare-financed bills and refundable child tax credits—moms with “somethin’ comin’ in” that covers their major household bills—in their discriminatory, absenteeism-friendly “voted-best-for-moms” jobs?

In reply to by GIG61

Dude-dude mrjinx007 Fri, 07/20/2018 - 00:05 Permalink

Still some older folks here with half a brain left.  Half an older & experienced brain = 100 millennial XBox zombie brains.  Just saying.  But this one might be different after all.  I say, bring out the popcorn!

Theory:

The devaluation of the Yuan, and rise in the USD, means the Chinese are getting ready to make a major move in US Treasuries.  If they liquidate two, three or perhaps even four or five hundred billion dollars worth of USTs, then once the Yuan is worth near shit, they tighten biggly-big by buying-up a crap-full more gold, and officially declaring the Yuan as gold-backed (create a currency crisis, blame it on Merica and Trump's tariffs, then fix the crisis).  BRICS then switches to the 'new' gold-backed Yuan.

US then faces a bond-crisis of unprecedented proportions.  Check, and Checkmate.

Make no mistake, the Chinese people, especially the younger ones, are just recently experiencing wealth (since maybe the 90s).  Most of them have been brought up in very austere conditions and can handle eating rice for breakfast, lunch and dinner seven-days a week.  Most Americans have been spoiled to no end, and would start complaining by lunch, and have sissy-fits by dinner if this happened on any given day.  The Chinese can handle a hyper-inflated Yuan for a few months or even a couple of years (and hell, the few that can't so be it - 1.4 Trillion Chinese?) Americans, on the other hand, can't deal with the instability this would lead to.

All that debt the Treasury issued and the Fed monetized since the 2008 FC will be coming home to roost faster than the Fed will be able to tighten - the two processes (higher rates & higher prices) will eventually crash Western economies.  Good night, and good luck (to us all).   

In reply to by mrjinx007

GIG61 Yen Cross Thu, 07/19/2018 - 22:32 Permalink

Today, my beloved President and his people and their damn twitter accounts helped me only the second time out of like 10 I think since he got into office.

Small fry currency trader, but on the other 8 I'm moving along nicely in profit and not having a squawk service next thing you know I'm stopped out in the blink of a fuckin eye. 

Just woke up 10 PM EST and see oil gapped about 120 pips. Shit flying all over the place today.

 

 

 

 

 

 

In reply to by Yen Cross