Economic Crisis News 2015-08-14
Currency Wars Back in Full Swing
On Monday it was revealed that China devalued their yuan currency a record 1.9%, bolstering their export industry which had been faltering recently, in part due to their currency’s strength. Exports fell 8.3% year over year in July, though only down 0.9% in yuan terms.
The yuan fell in trading the most in a day since 1994 after the news. Though the People’s Bank of China called this a one-time adjustment, but on Wednesday morning in China the PBOC devalued again by 1.6%. The currency continued to plunge. Thursday we learned that the country’s central bank had pushed their currency lower for an unprecedented 3 days in a row at 4.4%. The IMF welcomed China’s devaluation as it said it is moving toward letting free market forces determine the currency’s value.
Rather than watch their wealth get frittered away, middle and upper class Chinese will probably throw their money into housing and other asset trophies into US, Canada, Australia and New Zealand markets. It’s just a matter of time before we see the Federal Reserve respond overtly or covertly to start more QE programs or declare a new depression as a reason to keep interest rates at zero or even turn them negative as Andy Hoffman is anticipating.
John Kerry, our Secretary of State has actually come out and said that the US Dollar could cease to be the world reserve currency, in fact he said this is already ‘bubbling out there,’ for example if the US doesn’t pass the Iran Nuclear deal.
Finally, it seems after China’s official gold holdings update in June which increased their holdings about 60% to 1,658 tons, they’ve updated their holdings in July already by 1.5%. As TFMetals Reports, the Bank of China will update monthly on holdings; perhaps we’ll see this steady increase month to month which could lead to the IMF’s inclusion of the yuan in the SDR basket which has seems to have been delayed 9 months now until September 2016.
US Markets Show Weakness
The US Markets have been showing obvious signs of weakness over the last year and has been especially evident over the last few weeks.
After a strong showing, up 240 points Monday, the Dow lost nearly all gains Tuesday. Wednesday we saw bizarre behavior again with the close being only a third of a point off of Tuesday’s close, that’s crazy.
Furthermore, Tuesday’s levels were just 0.6% away from a new 2015 LOW. Business news sites are also calling this the death cross in the charts as the 50 day moving average moves below the 200 day moving average for the first time since December 2011. Thursday the Dow closed just over 5 points up. The S&P Closed slightly down.
The Dollar index has lost 1.5% week over week and is down month over month as well at an 8-week low of 96.32.
Asymmetric Warfare?
We should all remember the NYSE shutdown weeks ago as well as American websites hacked. Wednesday an explosion rocked a large Chinese port city, killing at least 50 people. This came after China’s currency devaluation. Have the financial system attacks between East and West now turned into actual warfare, or was this just an accident?
Tianjin, the victimized city is China’s third largest with an urban population of 11 million.
Precious Metals & Commodities
Gold and Silver recently have finally recovered. Gold up over 2% to $1,115 and silver up over 4% to $15.40. Palladium gained over 2% to $615 per ounce, but still way down for the month and the past year just like Platinum which reached $990, up over 3%.
Oil has not moved too much since our last report. WTI price is down 57 cents a barrel while Brent is actually up nearly a dollar. News is saying however that WTI actually broke under $42; just a little over a new 6-year low.
SRS Rocco is reporting that another 1 million ounces has been pulled from the COMEX, we can confidently say now that a silver shortage is likely within the next 2 to 5 years.
The price of copper is down over 11% month over month and 28% year over year; another point on the map showing the world economy is in a severe depression. Perhaps the currency devaluations are meant to prop up commodities from their death spiral?
Bitcoin
Bringing a new meaning to earlier discussed currency wars, the EFF, Electronic Frontier Foundation, has put out an article explaining how California’s newly proposed bitcoin license law would stifle innovation. We should support this effort, and not let California be the next New York that strangles digital currency innovation while it’s just an infant.
College Bubble 2.0
After significant research into the student loan bubble, we released a sequel to last year’s documentary, click here now to watch ‘The College Bubble 2.0‘ one of ours and Future Money Trends’ most professional videos to date. College attendance fell over 2% last year alone, almost as much as the government increased Pell Grant funding due to rising tuition rates. Student debt has now reached an incredible $1.4 Trillion, up well over 1% year over year.