It’s a terrible start of the year for world financial markets. All of the major U.S. stock indexes dropped for the fourth straight day, losing about 5% of value since the start of the year. It was not unexpected. Twice this week, Beijing halted trading on the Chinese stock market after steep sell-offs. Just 29 minutes after opening Thursday, China’s market plunged seven percent. Europe and the United States braced themselves for the aftershocks. The government has been trying to address China’s trend of dramatically slower growth with policy tweaks – this week, by devaluing the yuan in a controlled manner. But the psychological calculations that drive traders to dump stock are not always predictable. Some economists say not to worry: this is to be expected and it is nowhere as bad as China’s sell off last summer. But the fact remains that when China sneezes, the rest of the world catches a cold. For global markets, 2016 has gotten off to a rocky start.
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China Is Sneezing Hard, Infecting Global Markets
Posted January 7th, 2016 at 4:53 pm (UTC-5)
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Give China’s Devaluation a Chance
Posted August 12th, 2015 at 12:05 pm (UTC-5)
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Politicians in the U.S. are sure to call the devaluation a threat to American jobs, and politicians in Japan will bemoan its effects on their deflation fight. But it’s important to keep a sense of perspective.
Currencies Are Easy, Policies Are Hard
Posted July 7th, 2015 at 9:34 am (UTC-5)
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Among those who hope for or predict an agreement between Greece and its creditors that would keep it in the eurozone, there is a widely held belief that introduction of a new currency will be difficult, perhaps prohibitively so.