Elliott Wave Courses | by ForexCycle.com | Sunday, 25 October 2015 07:39 UTC
By Elliott Wave International
The following article on currency devaluation's role in deflation is from Elliott Wave International, the world's largest financial forecasting firm. EWI has just released a new report, Deflation and the Devaluation Derby, to help investors prepare now for the deflationary threat they see around the corner. Click here to read the new report >>
China's economy is slowing. Its stock market began to crash back in July. And the volatility rocking financial markets has been widely linked to the recent yuan devaluations by China's central bank.
"Surprise" has been a common word used by investors and financial pundits to describe the devaluation -- as in, "China's central bank surprise devaluation of yuan."
But what if we told you it wasn't a surprise -- it was in fact an expected event?
Below are three excerpts from analysis that EWI's own Chris Carolan published in his Sun-Tue-Thu Asian-Pacific Short Term Update on July 30 (several days before China's central bank first move to devalue the yuan against the U.S. dollar), then on Aug. 9 and Aug.11 (bold added).
The Asian-Pacific Short Term Update , July 30:
The Asian-Pacific Short Term Update, Aug. 9:
[T]here is real risk of a repeat of 1997's Asian currency crisis.
The Asian-Pacific Short Term Update, Aug. 11:
We all know what came next: the stunning 2,000-point decline in the DJIA, which -- in less than a week! -- erased two years' worth of rally in the world's benchmark stock index.
Is a huge U.S. stock plunge dead ahead? Not necessarily -- and when you read our latest analysis, you will see why -- but falling share prices are an inevitable result of the same deflationary forces that spark countries to devalue their currencies, and China is hardly alone. Countries around the world are following suit.
Make no mistake; currency devaluation in China and elsewhere is a side-effect of the deflationary forces spreading around the world. If history is any guide, only those who recognize the risks and opportunities of deflation, and see it coming, can prepare to protect their money from its tightening grip.
For more, read EWI's new report, Deflation and the Devaluation Derby, to get the facts and figures today so you can see around the corner and prepare for tomorrow. Click here to read the report now >>
Subscribe to Newsletter