The Red Dragon Roars While The Fed Waits

It’s as though I know what I’m talking about…

Several months ago when I was speaking at our Total Wealth Symposium in The Bahamas, I laid out a simple, straightforward path that would see China devalue its currency which would, in turn, lead to the Federal Reserve finally finding the cover it needs to raise interest rates here at home without fear of unleashing economic pain on America.

The first two steps along that path are unfolding now.

And that means the world economy, despite the hand-wringing we see from economists and the media, is turning up again … which means that emerging-market and commodity economies are in the early stages of a rebound and, as such, are good investments today.

So let me tell you the two plot points I’m talking about:

Those two plot points are critical, first-response indicators that the Chinese economy is responding positively to the surprise currency devaluation the country announced last August.

As I laid out in The Bahamas, China’s devaluation was good news for the global economy and for America — at the time, the exact opposite message we were being fed by so many in the mainstream punditry business, all of whom insisted a devaluation was a sign of Chinese economic weakness and pending collapse.

A Strong Dollar Crushes the Global Economy

Given the lunacy inside the Federal Reserve in the wake of the global financial crisis, China had no other option but to devalue its currency. As I’ve explained a few times, China’s currency (the yuan) was long pegged to the dollar. With the Fed talking the dollar higher in the last few years on hollow promises to raise interest rates, that forced the yuan higher as well … and a higher yuan caused all manner of upset inside China and, ultimately, the global economy.