Wesbury 101 – Chinese Chicken Littles

brought you by Guy Baker

The sky is falling! It’s 2008 part 2! This is the end of the world as we know it! The chicken littles are out in force over China’s recent currency devaluations.

Let’s put things in perspective. Yes, the Chinese yuan is down 3.5% in the past year. But over that same period, the Japanese yen is down 17.6%, the euro 16.4%, the Canadian dollar 15.8%, and the peso is down nearly 20%. And we do nearly twice the trade with those countries than we do with China.

With a cheaper foreign currency, Americans incomes go further. Their work buys more.

The idea that the Chinese devaluation is going to send ripples of catastrophe across the world is nothing more than a chicken little story.

 

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