The world economy could soon be in crisis mode if the ongoing “cold war” does not end quickly. America and China, the world’s biggest economies, the first and second-largest economies respectively have been on a never-ending trade war that will be on for a long time in the future.
Analysts and other crypto traders claim that this ongoing disagreement between the world’s two largest economies will work in favor of Bitcoin. Bitcoin seems undisturbed in all this and even registered a rise in its prices last week. This upbeat nature from bitcoin will surely drive more and more people to it shortly to protect their assets.
Where did it all Begin?
Following the trade war, the Chines government devised a way to punish the United States. China devalued its currencies, breaking away from the norm of sprucing it upwards as it had been the case.
Following this unprecedented move, the US came out calling China a “Currency Manipulator,” in a move that could allow America to impose stiff sanctions on China. Ripple effects were felt as the markets tried to absorb all these developments at once; many markets were on a downslide and are still recovering today.
To ensure the safety of its investors, China, through its central bank, bought more of its own currency to stabilize it. An act that was seen as a warning to those who cared to listen that China still has some cards up its sleeves and could use them anytime if provoked.
China has been for long doing the opposite in the markets and has actively propped up its currency in a bid to grow its economy, as it desires to be independent of other global players in the world’s economy.
However, the US has been exposed in this entire wrangle as the IMF will likely side with China in this case, and America will itself become vulnerable to international sanctions that will be damaging to its own economy.
More currency wars will be witnessed in the near future, as politicians will not act rationally as expected in this matter. Western nations are actively moving away from neoliberal attitudes that existed in the nineties.
A weaker Chinese currency will most likely disadvantage all of its trade partners. These partners will resort to weakening their own currencies, which will boil down to their other trading partners doing the same. Countries that do not use floating currencies will use different methods to achieve similar effects including Interest cut rates, meaning that these currencies will lose demand, a move that will considerably be damaging to local economies.