War is Declared! – China just dropped the warning Yuan!

In the middle of the night, on Dec 6, 2016, silently, China Declared War on the United States by dropping  their currency, the Yuan, by 8.8 percent. Most people missed it because it only lasted for a millisecond, but that was enough. They had done this before. This time, the message was received!

The last time the Chinese did this was in August of 2015. The Chinese economy had begun to slow just as the U.S. economy was picking up. The U.S. central bank increased U.S. interest rates for the first time in many years, against the direct wishes of the Chinese authorities. Since the Yuan had been tied directly to the US Dollar, this simple rate increase was seen by China, as an aggressive “Act of  War”. On August 12, 2015 the Chinese retaliated. They dropped their Yuan by three percent in two days. This sent all financial markets around the world  (including their own) into a tailspin. At the time they had sent an economic message to Janet Yellen. Don’t mess with China!

The Chinese desperately fear that we are entering a period of sustained global deflation. Their fear of global deflation  is based on three simple principles:

1. Deflation can only be fully understood from a global perspective (and in U.S. dollars). They are trying to ‘export deflation and import inflation’.

2. The forces of inflation and deflation are always in a “tug of war”. On the deflation side are their ageing demographics, overcapacity, and extreme global debt levels. On the inflation side there is money printing, continual expansion of this debt, and government infrastructure spending.

3. The internet is the “Silent Killer”.  It is the greatest unstoppable deflationary force of all time.

Our future will be  a counter-intuitive deflationary world where oil prices drop, retailers are reduced to “Showrooms and phones”, banks are formed where nobody pays, and asset taxes replace income taxes.  Although this suggests some disturbing economic scenarios, all of them will be made worse by the launch of  this Total Economic War by China!

Chinese Economic Power – at the speed of light!

We need to fear the Chinese. Their economy is now slowing and they will do “Whatever it takes” to attain global economic dominance. Silently, they have just initiated their plan to greatly devalue the yuan, and export a massive “Wave of Deflation” around the world. In the past year, they have devalued their yuan by over seven percent. It is possible that this “Deflation Tsunami” just launched by the Chinese will slowly and silently engulf the world.  While we have all been watching Trump take office in the United States, the Chinese have launched the most frightening economic war machine of all time. 

Some people said that this drop in the Yuan on Dec 6, 2016 was a mistake or a blip. But the Chinese don’t make these kinds of mistakes. In our high-speed internet world, dropping the Yuan for a millisecond was not a mistake. Just like a parade of missiles, it was a show of economic and technological power! Last year their message targeted Janet Yellen. This year, exactly seventy-five years after Pearl Harbor, the message is targeting Donald Trump. Welcome to our twenty-first-century warfare. The mascot is a Panda Bear.  He just dropped his warning Yuan!