If China devalues their currency, then it is likely to push others towards devaluing theirs, which fits with the loosening money policy which seems to be popular from Japan to USA and down here too, in an effort to counter the frightened rabbit syndrome and loss of wealth effect spending due to stock markets crunched and interest rates down. That will lower interest rates more and cause inflation, not deflation. Because it is countering a heavily deflationary environment, there wouldn't really be inflation, just less deflation.
Then the wealth effect will reappear as profits come in strong, stock markets rise and people come out from their caves again. Then interest rates can rise and the whole thing can start again in a few years.
Right now, money printing is well underway in Japan. The Fed is cutting interest rates and giving monetary slack, no doubt including a bit of printing here and there. New Zealand is doing that too, which won't cause excessive liquidity in the world's financial systems, so don't worry about that.
I doubt that it is worth trying to buy some Eurodollar futures based on speculation about what China might do in several months. All that speculation will already be well included in the markets. Don't lose your money in Eurodollars marginmike, put it in Qualcomm at a bargain price and MAKE some money.
Mqurice
This might be off Qualcomm topic, but no flaming as I reckon it is closer than footy. |
