InternationalMarkets & Economy

Yuan devaluation is effect of near-hard landing in China

Tell lies long enough and even the tellers will lose track of reality

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Takeaways: In isolation, the U.S. economy is doing well enough for the Fed to justify liftoff. The yuan devaluation is the effect of a near-hard landing in China. Its GDP is closer to zero than its official 7 percent. Part of China’s slowdown comes from attempting to switch to a market-based economy, but in the short term, China has suffered by maintaining a dollar-peg last winter while the rest of the world devalued vs. the dollar. Oh, boy. Here we were, minding our own business, finger-thrumming at desks while waiting for the Fed to begin “normalizing” next month. Then, China. I'll cut to the chase and then try to explain it. Stick with Clinton’s Law: “It’s the economy, stupid.” Currencies and central bank actions are effects of underlying economic pressures, and the economics are heavily affected by national politics. If you ever objected to including politics in a financial journal, this is the week to understand. In isolation, the U.S. eco...