“No man is an island entire of itself; every man
is a piece of the continent, a part of the main…”
John Donne’s words apply to money as well as to mankind. No currency is an island unto itself – even though the “experts” would often like you to think so.
Mainstream economists and media pundits are telling people that problems in China are unlikely to cause serious problems in the United States. They point to the fact that China only accounts for a small percentage of U.S. trade, for example, and that the falling Chinese stock market has very little to do with our stock market. Unfortunately, they are missing the point.
China is now to the rest of the world what the U.S. housing market was before the 2008 financial crisis – it is the epicenter of global instability. You can read more about China’s problems here.
And at the very heart of that instability lies the yuan.
Western investors may not realize that the yuan has appreciated by nearly 70% against the yen over the last five years, delivering a blow to China’s export position vis-à-vis Japan. And that creates a ripple effect that will be felt in multiple markets.
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