In case you haven’t noticed things aren’t so hot in China. In fact the country, the Ultimate Crony Capitalist State is in serious trouble. Today it devalued the yuan, its currency.
We have been sounding the alarm on China for a very long time. Not that we’ve been the only ones. That China has been headed for real trouble has been obvious to many for quite a while, years. Regardless, trouble is here now. The world’s second largest economy is pretty much in crisis mode, or very near it and this state of affairs will have an impact (it already has) globally.
What should also be understood is that this is not a separate episode from the initial financial crisis which hit much of the world in 2008. China, Greece, Japan, it’s a continuation of the Great Recession. We’re not out of it. Indeed, some believe that we likely have not seen the worst of it.
But the move, nonetheless, spooked world markets. U.S. stocks were slammed along with emerging markets. The Dow was off 1.2 percent to 17,402, and the S&P 500 was down nearly a percent at 2,084. Developed markets were hit as traders worried that China’s economy would slow enough to impact sales of everything from cement to automobiles. The German DAX was down 2.7 percent.
“The key is if we knew this was going to be the end of it—the 2 percent devaluation—I think the markets would bounce back,” said Marc Chandler, head of currency strategy at Brown Brothers Harriman. “The problem is people don’t think this will be the end of it.”