China's Currency Move Draws Cheers

Brian Wesbury and Bob Stein of First Trust Advisors analyze the ramifications of the change in China's currency/monetary policy.  For them, the bottom line is that they will no longer outsource their monetary policy to the Federal Reserve.  They now have the opportunity for a stable unit of account, unlike the United States. 

It also means that China will buy fewer Treasury securities.  Thus, the U.S. Treasury will probably have to offer higher interest rates to entice other buyers to purchase their bills, notes and bonds.  The U.S. burned the Middle Eastern countries with a depreciating dollar back in the 1970's.  We have not burned China with a depreciating dollar over the last ten years.  It will be interesting to see who steps up to the plate as the buyer of last resort.

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