The Blame Game: Is China Responsible, or the Fed?
China has been in the headlines and is widely seen as the culprit for the global financial turmoil. China disagrees. In fact, an official from the People’s Bank of China has blamed the Fed for the mess, given its plans to hike rates this year. The country has joined the IMF in urging the Fed to delay its pending rate hike – or call it off altogether.
The dollar is already stronger given expectations of a rate hike. It we get one, the dollar will be stronger still! That could devastate emerging markets like China that rely on capital inflows, or that are trying to pay off U.S.-dollar denominated debt.
Whether China or the Fed is to blame for this market volatility, one thing’s certain – the Red Dragon dominates commodity consumption. So when China stops buying, commodity demand dries up and prices fall. That means that as China slows, as it is now, economies that depend on commodity exports will suffer.
