Why A Currency War Will Only Weaken Growth And Strengthen Gold

The devaluation of the yuan above 7 per US dollar shows that its financial and monetary systems are overstretched. China has gone from needing two units of debt to create one unit of GDP in 2008 to requiring 6.75 units of debt to generate the same growth (source: Bloomberg and Apple Tree Capital). The foreign currency reserve ratio compared to the broad money supply is less than 12%, when the Asian crisis of 1997 was generated once the same ratio fell below 25%.