The talking heads are warning that the Chinese currency devaluation means another round of deflation. On the face of it that would seem true, as China is able to export "cheaper" products and bring prices down in consuming countries. But the markets don't seem to be saying this. The Euro bounces up, the Yen bounces up, and the USD gets weak. The reason for this is that a devaluation by China will make the US Fed reconsider the tightening, or normalization, of interest rates. Whatever "normalization" means these days.
The fact that China devaluation has the potential for a renewal of the decades long currency wars, and the forward looking Fed, despite their protestations of "data dependency", will drag their feet on anything that leads to a stronger US Dollar. Jobs are part of the data. They may raise short term rates a tiny amount in the short term, but they will be dragging their feet in the longer term. There are still huge debts around the world that must be inflated away or down. Growth is an elusive chimera. I don't believe the world will see the growth that characterized the last 50 years. We are running out of room to grow. All that is left is for a loss of faith in money. Whatever "money" means these days.....
So I repost that gold picture. It is so shiny!