August 05, 2019

One would wonder why a country would deliberately depreciate its currency. Inflicting a higher inflation rate on its population is not a good way for a government to gain popularity or to inflict damage on its competitors. Similarly lowering the country rate of return relative to the rest of the world is not a way to attract capital, increase incentive to save and invest in the country. Why would a country engage in currency manipulation that lowers its exchange rate? A higher inflation and a lower rate of return are not good things. Focusing on the exchange rate and designating China a currency manipulator is a major policy mistake that will takes us closer to a full-blown trade war increasing the danger of a global recession. A bearish outlook. The Stock market decline is a major warning signal. Two wrongs don’t make a right.

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