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Yuan & You: How China’s Weakened Currency Affects U.S.

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CHINA – For three straight days, the Chinese government devalued its currency that had been holding its own against the dollar and other major currencies for most of this century, even though market forces should have been forcing it down.

So, Beijing did some hocus pocus that will let the yuan make big moves up or down, depending on how investors feel about its strength or weakness.

A weak yuan compared to the dollar means Chinese goods will be cheaper over here, things like cars, computers, and clothing. But it also means U.S. goods will cost more over there.

Apple, for example, makes iPhones and iPad in China. A weak yuan makes Apple products cheaper, but the Chinese income for all U.S. companies loses value when it comes back to America in the form of earnings. And lower earnings mean lower stock prices.

Lower earnings also lead to layoffs and joblessness.

But, the good news is that this might be the time to buy a house, because the folks who know about these things say interest rates will stay low.

On the other hand, lower interest rates mean lower stock prices, which leads to reductions in 401Ks and other retirement investments.

But the other good news is that Chinese consumers will use less oil and oil-based products, which is just about anything that’s not edible. And lower demand will mean lower prices at the gas pumps here in Texas. And that’s always a good thing, mostly.

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