Guest Post by Jesse
China shocked the world markets overnight by devaluing their currency by the most in two decades.
A devaluation of this sort is designed to improve the domestic economy by stimulating exports, lowering domestic costs of production relative to other sources, and to inhibit imports by raising their relative prices.
In other words, China clearly signaled that the US dollar, to which they were matching their own currency, is overvalued relative to the state of the global economy, and especially their own.
China is ‘the canary in the coal mine’ for the global economy, a major source of labor and supply. Their own economy is sick because demand from overseas is down.
And why is demand lower? Because multinational corporations and the banking system have been financializing nearly everything to increase corporate profits and the wealth of a very few, pretty much at the expense of everyone else.
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