In my humble opinion, China allowing the yuan to appreciate is the impetus needed for the Federal Reserve to begin to raise interest rates that will lead to the eventual hyperinflationary currency spiral along with the deflationary credit/wages spiral! This will not be something that just "spontaneously" happens, it will be a gradual progression of the yuan appreciating and the Fed Reserve raising interest rates. However, the breaking point will be sudden and anything but gradual. (what signifies this breaking point is up for debate and open for speculation)

With the culmination of these events a Hobbian view of human nature, "dog eat dog" survival of the fittest mentality comes to mind! In short, it will be mankind at its ugliest! I do believe there will be much good that comes from this and many good-hearted people will shine during this period; however, the severity of this economic armageddon will trump any noble efforts in the short term. The long term outlook is too hard to predict due to the amount of variables and factors associated with this economic calamity.

Stocks Soar As China Finally Gives In To Demands For a Stronger Currency

Posted Jun 21, 2010 10:15am EDT by Peter Gorenstein in Investing, Banking, China

Stock markets around the world are starting the week on a bullish note following China’s decision to allow its currency to appreciate against the dollar.

A stronger yuan means higher prices for Chinese exports – the base of their economy - but more competitive prices for the rest of the world’s goods. China has often been criticized for keeping their currency artificially low, making for unfair competition. Domestically, a stronger yuan gives the Chinese more purchasing power and lowers the risk of inflation, an easy way for Beijing to appease their growing middle class.

This is the first time China is allowing its currency to float since the financial crisis in 2008. Prior to that, China let the yuan to rise by about 20% beginning in 2005. Don't expect a jump like that this time, China is controlling the situation tightly and will continue to limit the currency to a 0.5% daily trading range. What's different is China's sudden willingness to allow movement to the outer edge of the band: On Monday, the yuan rose 0.42% vs. the dollar, the biggest one-day move since July 2005, according to Bloomberg.

In the end, this move is largely symbolic, as Aaron and Henry point out in the accompanying clip. With the upcoming G20 meeting, the announcement illustrates China’s willingness to play their part in helping to rebalance the global economy -- at least symbolically.