Morning Rundown | China is in a Race to Debase Now..
Financial War is right under the surface
Market Rundown:
Good Morning.
Markets continue to weigh the comments by Chair Powell as bearish for stocks. The Dollar is firmer. Bonds are weaker. Stocks are slightly offered. Gold, Silver, Oil, and Copper are all down. Grains are up a little now. Crypto is mixxed. See the podcast for more details
Post Excerpt: History May Be Repeating
On March 30th the Founders group had a nice conversation about Gold, Oil, and Chinese behavior. But inside that chat we talked a bit about the Yen devaluation that had started. We discussed 3 potential reasons for the move higher (weaker vs the USD and Chinese Yuan). One thing noted was the potential for a Chinese debasement and why that could happen.
The bottom line from that broadcast was this: If China saw the Yen weakness as inhibiting their ability to export goods in the region, they could, as they did in 2014-2015 aggressively weaken their currency to maintain competitiveness. Given that China also has to rescue its domestic real estate market right now, and that they will need to stimulate their economy post their own Covid lockdowns; the odds of a much weaker Yuan increase a lot. This may have started happening. Step by step on GoldFix:
1- March 30th Founders Class: A discussion on what happened the last time Japan weakened the Yen like this.
We moved to the Gold/ Yen relationship and why something is off in Japan.Tied that to the last time the Yen weakened like this, 2015.
China weakened the Yuan than and will again was one potential conclusion.
2- April 20th- Chart: Yuan and Yen versus the Dollar
“competitive devaluation.. next at bat. The yuan”
3- April 21st: The Race to Debase begins
That is a back of the napkin macro geopolitical assessment of the situation in Asia. The US needs deperately to get inflation down without destrpoying paper markets.
China and Russia want commodities up. China absolutely needs to loosen domestic money to get its finanical side going again.
This is finanical warfare plain and simple. Therefore in the US: watch commodities like a dove. Watch Credit like a Hawk. In China, they need the opposite.
Podcast:
Founders Class Preview, Detailed explanation on Moor’s levels
Zen Moment:
Report Excerpt: Watch Credit like Hawk, Commodities Like a Dove
At the same time, the main threat for the Fed is that credit picks up before current inflation is fully out of the system, leaving inflation embedded at unacceptably high rates. The rapidity of the rise in yields this year, however, appears to be scaring off mortgage approvals, especially in the context of the rise in housing prices, undermining the case for the Fed to endeavour to push real yields higher. And US growth could disappoint in Q2, as we explain below