Jim Rickards warns of 20% Chinese Yuan devaluation

In July 2014, I saw a sequence of events in a dream, which I interpreted to mean the U.S. dollar would gain value relative to other currencies, causing hardships for many nations (since International trade is conducted in dollars). Then the dollar was suddenly devalued, causing China to become so angry they threatened to declare war.

The first part of the dream came to pass in 2015 as the dollar index soared from 84 at the time of my dream to over 100 by March 2015. It later peaked above 103 in January 2017 before retracing back to the current level at about 94. (Source: marketwatch.com)

Just as I saw in the dream, the strong dollar has caused problems for other nations, especially for China because their currency was pegged to the dollar at a fixed exchange rate, so as the dollar rose in 2015, so did the Chinese yuan, which was harmful to their export driven economy, making their products less competitive in the global market. So in August 2015, they took action, devaluing the yuan, which caused our stock market to drop 11%. Then over the next six months, they devalued it again, resulting in another 11% drop in our stock market in January 2016.

Currency expert Jim Rickards is now warning China could soon devalue the yuan again, which would likely cause our equity markets to drop sharply again. However, the damage could be far more severe this time because he is forecasting USD/CNY would be reset to 7.95, compared to the current price 6.63, which would be a 20% devaluation, much larger than the 3% devaluation in August 2015 when the USD/CNY price moved from 6.20 to 6.40, and much larger than China’s second devaluation by early 2016, which was also about 3% as the price moved from 6.40 to 6.60 (Source: jimrickards.blogspot.com). So, if 3% devaluations resulted in back to back 11% drops in our equity markets, a sudden 20% devaluation could be far more devastating.

Jim Rickards summarized China’s dilemna as follows:

China escaped the impossible trinity in 2015 by devaluing their currency. China escaped the impossible trinity again in 2017 using a hat trick of partially closing the capital account, raising interest rates, and allowing the yuan to appreciate against the dollar thereby breaking the exchange rate peg.

The problem for China is that these solutions are all non-sustainable. China cannot keep the capital account closed without damaging badly needed capital inflows. Who will invest in China if you can’t get your money out?

China also cannot maintain high interest rates because the interest costs will bankrupt insolvent state owned enterprises and lead to an increase in unemployment, which is socially destabilizing.

China cannot maintain a strong yuan because that damages exports, hurts export-related jobs, and causes deflation to be imported through lower import prices. An artificially inflated currency also drains the foreign exchange reserves needed to maintain the peg.

Since the impossible trinity really is impossible in the long-run, and since China’s current solutions are non-sustainable, what can China do to solve its policy trilemma?

The most obvious course, and the one likely to be implemented, is a maxi-devaluation of the yuan to around the 7.95 level or lower.

This would stop capital outflows because those outflows are driven by devaluation fears. Once the devaluation happens, there is no longer any urgency about getting money out of China. In fact, new money should start to flow in to take advantage of much lower local currency prices.

There are early signs that this policy of devaluation is already being put into place. The yuan has dropped sharply in the past month from 6.45 to 6.62. This resembles the stealth devaluation of late 2015, but is somewhat more aggressive.

The geopolitical situation is also ripe for a Chinese devaluation policy. Once the National Party Congress is over in late October, President Xi will have secured his political ambitions and will no longer find it necessary to avoid rocking the boat. (Source: jimrickards.blogspot.com)

Although I did not see any Chinese yuan devaluations in my dream, it would fit the first scene where the dollar was standing strong versus other currencies because a devalued yuan would increase the dollar’s value.

Devaluing the yuan would be a temporary boom for China’s economy as their export prices would become more competitive overnight. It would also attract foreign investors to China since there would be no more fears of a yuan devaluation, but it would be harmful to the U.S., not only damaging our equity markets, but also increasing the cost of our $1.1 trillion debt to China by forcing us to repay them with more valuable dollars (Source: investopedia.com) So if it happens, it would put pressure on the shadow figures controlling the U.S. dollar to retaliate, setting the stage for the next scene in my dream when the dollar was suddenly devalued, which was shown in my dream as a table getting turned over, knocking the U.S. representatives (U.S. dollar) down and pinning them to the floor. That might explain why I saw China’s representatives get very angry. They all stood up and walked out of the assembly hall, threatening to declare war against the United States. They did not actually declare war;  they just made threats saying, “We will declare war!”

Prophetic insights have revealed a big drop in equity markets coming soon, causing SPX to drop back down to about where it was prior to the November 2016 election. However, the cause for the drop is believed to be related to an actual military conflict, not just the threat of war and not a currency war, so I think these are two separate events. If there is another devaluation of the Chinese yuan coming, I think it would be later, possibly sometime next year, not this year.

There are still many unknowns regarding the timing and sequence of events, but when prophetic warnings align with technical warnings, it’s time for investors to beware. It looks like the stage is now being set for some wild swings in currency values in 2018, which would likely cause big losses for equities as investors seek safety in less risky assets, such as precious metals. The magnitude of the coming devaluations is far bigger than what we’ve seen in the past, putting markets in uncharted waters and putting the global economy on track for the rebirth of the phoenix in 2018, a new global currency, as predicted on the front cover of the 1988 Economist magazine.

This is not a recommendation for investing.

James Bailey

Author: James Bailey

James Bailey is an author, business owner, husband and father of two children. His vision is to broadcast the good news of Jesus Christ through blog sites and other media outlets.

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MOSES
MOSES
Member
November 18, 2017 10:04 PM

Not too long ago Rickards mangled the scripture verse: “The love of money is the root of all kinds of evil” and said Christians say that money is the root of all evil. i sent him an email asking him to correct his mistake in a follow up email and I do not believe he ever did correct his mistake. I believe Rickards is also going to be wrong about the Yuan devaluation and you will instead see more of a parity of the dollar and the Yuan. Do not trust in Jim Rickards. MOSES

Richard
Richard
Member
November 18, 2017 10:52 PM

I also agree that Rickards is of little value in the financial world.

MOSES
MOSES
Member
November 20, 2017 3:13 PM

http://www.globalfinancialprotection.bz/donald-trump-and-the-gcr.html
On the URL above and just above the colorful globe with the flags of the nations on it is an orange URL link to a video where Trump is talking about the currencies being on a level playing field with each other ( I believe it is 1:1 parity as confirmed by other pages you will find on the website above) and this level playing field strategy of currency values came out of a conversation he had with the president of China. Enjoy, MOSES

Joe
Joe
Member
November 17, 2017 9:54 PM

I think US is playing a double game in oil markets. On one hand there is a revolution in shale oil. But in order not to loose influence in middle east and the base of petro dollar, it is buying oil from there and exporting to nations like India.
http://gulfnews.com/business/sectors/energy/india-to-import-more-oil-from-us-as-energy-ties-grow-1.2100084
At the same time US wants to eliminate oil production competition from countries like Russia,Iran, Venezuela etc,hence the sanctions.
Coming oil exchange in China is a joint response by Russia,China, and Iran to stop this US double game.
From a uni polar or US centric world we are moving to multi polar world where US is facing checkmates in this great geo political chess game.

d ames
d ames
Member
November 17, 2017 11:40 AM

this fits with what John Paul Jackson was shown. A new world currency and a new us currency. Shane warren was shown that when the new world currency comes that the government has to pay its bills and it cuts domestic programs. The prices in the grocery stores are rising. Hyperinflation is coming. Get out of debt now. Brett Creamer was shown that when martial law comes that people will not be able to pay their mortgages. That the government forecloses on those individuals and evicts them then moves illegals into their homes. We do not know when but we do know it is coming. Prepare now accordingly.

William
William
Member
November 17, 2017 12:23 AM
Concerning the oversea trip D.T. just finished,Jim Rickards’ opinion is that Trump is preparing for the war. Trump went to Japan, South Korea and had a meeting with Chinese President Xi Jinping on Nov 8. The following is Jim Rickards’ own words: Much of the reporting on this trip has involved international trade, but it’s a mistake to focus on that.This trip was a pre-war gathering of allies (Japan and South Korea) and potential allies (China) in a last-ditch struggle to head off a hot war with North Korea, led by the reckless Kim Jong Un. At this point, there are only four possible outcomes of the US-North Korea confrontation over nuclear weapons: 1. Kim Jung Un stands down and gives up his nuclear weapons program. 2. The US and China combine forces to decapitate the Kim dynasty and force regime change in North Korea. 3. Preventive attack on North Korea by the US before 20 March 2018. 4. The US accepts a nuclear-armed North Korea and relies on containment and deterrence to constrain its actions. , I estimate the degree distribution of those possible outcomes as follows: • Kim stands down: 10% • Regime change: 20% • War: 70% • US lives with nuclear North Korea: 0%. Trump’s visits to Japan and South Korea were about leaving the door open to negotiations in the hope that Kim would stand down while also preparing for war. Trump’s visit to China was about asking for assistance in regime change. Xi is unlikely to agree to help the US in this regard. This means war. Instead, Trump and Xi no doubt discussed China’s ‘red lines’ in North Korea so that a war between the US and North Korea does not escalate into a war with China. Almost none of this is fully… Read more »
William
William
Member
November 17, 2017 2:30 PM

China is such a heavy weight country. China had war with Vietnam in 1979. At those time, China was not rich at all. And Vietnam was dragged for 10 years in the war . Vietnam’s economy in those 10 years did not make progress at all, while China’s economy in those 10 years was hardly been affected. In the current world, only US or Russia has the capacity to have war with China. Whoever dare to have war with China nowadays, he must be out of his mind.

Matt NZ
Matt NZ
Member
November 19, 2017 8:17 PM

Watching Germany!

“Worst Case Scenario” Looms As Merkel’s “Jamaica Coalition” Collapses; EUR Sinks

http://www.zerohedge.com/news/2017-11-19/%E2%80%9Cworst-case-scenario%E2%80%9D-looms-merkel%E2%80%99s-%E2%80%9Cjamaica-coalition%E2%80%9D-collapses

Ed H
Ed H
Member
November 18, 2017 9:22 AM

Before the dollar devalues we need to move into assets that will go up and not down . Anyone have some suggestions?

John Smith
Member
November 18, 2017 1:27 PM

Ed H: Its a tough question. I was thinking some rental property (3/2 and 2/2 residential houses), farm land, physical silver/gold, and I was even thinking physical copper. Old silver items and coins would be good too. Of course on land, one should probably have cash in a safe place and wait until a period after the stock market bust to get rental property for 50 cents on the dollar, assuming the dollar doesn’t die first or at the same time.

Ed H
Ed H
Member
November 18, 2017 7:51 PM

John,
Thanks. Been praying about this very decision for a while. Still no real direction so far.

Jesse Wanskasmith
Jesse Wanskasmith
Member
December 3, 2017 11:03 PM

Interesting article. How does Hyper-inflation play into the need to devalue to the Yuan to Dollar? After this correction, a strong dollar seems likely to continue (to our own detriment) increasing interest rates… and Dow 40,000 have been proposed, as well as BTC/USD 40,000.

I agree this scenario is likely a year out from now.

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