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     Mar 24, '14


CREDIT BUBBLE BULLETIN
Darkening in the East
Commentary and weekly watch by Doug Noland

Last week I posited that "Ukraine and China pose clear and present dangers to global financial markets". At least for the week, Russian troops stayed put on their side of the Russia/Ukraine border. And while the West ratcheted up sanctions against Russia, at this point leaders on both sides of this crisis appear keen to avoid actions with real economic



impact. At the same time, Putinís chilling speech on Monday supported my view of a darkening geopolitical backdrop - a potential inflection point of historical significance.

So let's direct some attention to China. The Chinese renminbi declined 1.22% last week, boosting its one-month drop to 2.16%. A Thursday Bloomberg headline read "China's Yuan Slumps Most Since 2008 as Central Bank Cuts Fixing". My "headline": Beggar thy neighbor? Ramifications and consequences - financial, economic, geopolitical? After trading near multi-year lows on Thursday, Friday saw Chinese stocks spring to life with a 2.7% surge.

The bullish take is that more aggressive fiscal stimulus is in the offing, while the People's Bank of China (PBOC) is in the process of weakening the currency and is about to ease monetary policy. The increasingly confident bearish view holds that Chinese policymakers are more worried by what appears an acceleration of financial instability and economic weakness. More ...

Doug Noland is a market strategist for the Prudent Bear Funds.

(Republished with permission from PrudentBear.com. Copyright 2005-2014 David W Tice & Associates. All rights reserved.)





 

 

 
 



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