Currency War: U.S. Hedge Funds Mount New Attacks on China's Yuan

This is incorrect. Hedge funds borrow and create temporary money by writing derivative contracts such as options, futures & swaps. It is by this logic they can actually muster more funds than the PBOC in aggregate. Quite simply the market for currencies is bigger than the PBOC and the hedge funds, but there are more hedge funds that are richer than the 3T in reserves the PBOC has access to.

This is partly why the PBOC uses the overnight rate to limit resources (such as to affect the interest rate of the derivatives instead of the Yuan prices they bear). It would be possible to profit by arbitraging the interest rate so this would make using derivatives expensive too.

Of course affecting interest rates affects the entire economy as a whole and is unsustainable.

Ironically, these unemployed million of disgruntled workers will not move into the empty buildings in the city; They'll most likely move back to the countryside. They will, however, be back in the city for protesting.

That's characteristic of both bubbles and genuine exceptional performance, and in many situations in addition to national economies. Look at rapidly growing startups, for example.

Click on the max timeframe for the first charts below to see the similar growth curves:

http://www.tradingeconomics.com/japan/gdp

http://www.tradingeconomics.com/china/gdp

Europe still has significant headwinds, Canada and the middle east...that's pretty obvious with $30/barrel oil prices, Russia of course not doing terribly great, capital flooding back to the US from Central and South America due to interest rates rising.

Keep in mind, a lot of manufacturing is moving back to the US from China with automation being cheeper than (quickly rising) Chinese labor rates [1] [2] [3].

If China cannot stoke internal demand quickly enough (and I assure you, it cannot), it's going to slide into a deep recession. On the bright side, this is going to help cool off London, Toronto, Vancouver, SF/LA, Miami, and central Texas property markets (where a lot of Chinese money was flowing into).

[1] http://www.marketwatch.com/story/us-flips-the-script-on-jobs...

[2] http://news.yahoo.com/manufacturing-moving-china-us-survey-0...

[3] http://www.economist.com/news/special-report/21569570-growin...

Those subsistence farmers are kept that way because there's nothing else for them to do and there never will be. China can't allow the productivity of their farming to rise - it's among the lowest on earth - because of the social chaos that would occur. Unless you can find another three to four billion global consumers equal to your typical US or European consumer, such that China can then employ 450 million more people in jobs.

http://www.wsj.com/articles/chinas-foreign-exchange-reserves...

Because even if the U.S was doing it, it would be minor fudging. If China is doing it, it's almost wholly fabricated and un-reflective of reality. The U.S has plenty of independent verification of its numbers, and tons of channels for oversight. China literally has no oversight. Their government is the end-all, be-all. The alpha and omega. They don't have any oversight whatsoever. Their government runs the media (that's not an exaggeration, they literally own the news agencies) as well, so you don't get for-profit news organizations who would love nothing more than an economic controversy of that scale to come out so they could report on it and make loads of cash.

Basically, the entire premise is silly if you just use a little critical thinking.

http://www.economist.com/content/global_debt_clock

But in general I agree with your overall statement... everyone talks about China's "ghost cities" as if they are some sort of quixotic or keynesian tomfoolery... but a simpler explanation is simply that China wants to urbanize and grow a middle class as part of the development cycle you mentioned. They probably need a "hard landing" in order to cool off their real estate market and clear out the dead wood of their malinvestment in order to realize that goal.

Also don't tell the US from 1820-1970 that. The strong dollar, backed by a gold standard, enabled the US to become the largest economy at warp speed.

A balanced to strong currency is ideal for a country. It provides increased purchasing power for consumers; it lures foreign capital; it keeps import costs low, including for commodities + producers; it keeps inflation from eroding the standard of living of the bottom 3/4 of citizens that can't hedge inflation; and it generates confidence for consumers, foreign investors, domestic investors, and businesses.

That doesn't make sense. The oil price is denominated in US dollars, so by devaluing you push it up. It's true that the price of oil is dropping too, but in the case of China they don't have domestic reserves so that doesn't matter.

IN the case of Russia they are in a pretty severe recession: http://www.reuters.com/article/us-russia-economy-idUSKBN0U70...

Perhaps it makes more sense to Chinese eyes, but that looks very odd to me. If Soros tries and fails, he'll lose a lot of money, but that would seem to be no concern of the Chinese government. So if the Chinese authorities had no worries about the outcome it seems like they'd have no reason to try and warn him off; since they are trying to warn him off, it suggests they're worried.

The entire thing sort of comes off as an admission of weakness to me, which I doubt was the intention.

"by 2018 all of China's excess reserves — cash that it has on hand to use immediately — could be gone."

http://www.businessinsider.com/chinas-fx-reserves-less-than-...

I am mostly optimistic about the future, but I also think it is a good idea to make plans for unlikely, but disruptive events.

When George Soros, based in New York, 'broke' the bank of England it was not an attack on Britain either by him or the US. He broke no laws. In fact by showing that the ERM was unsustainable and thereby preventing us adopting the Euro* he did us a massive favour. The UK economy is eternally in his debt.

* Alright, it's a bit of a stretch laying that entirely at his feet, but in an alternate timeline where we stayed in the ERM Euro membership was the logical outcome.