The Chinese economic shift has got the world scared. China has the second largest economy in the world, and the major economic shifts that it is currently undergoing are having a major impact on the global economy. George Soros, a hedge fund genius who made his name with accurate predictions says that the world economic situation is similar to what we say in 2008. George Soros is not the only one who says there is a need for extreme caution. Three major volatility measures, the VIX, also known as the ‘fear gauge’, the Japanese shares measure the Nikkei Stock Average Volatility Index on opensocietyfoundatons.org, and a Merrill Lynch Treasury bonds index are all way up over last year, 13,43, and 5.7 percent respectively.
Why the major fall out? China has a large and powerful economy on Bloomberg and the world has generally trusted them as managers of money. But. now that the giant is venturing into uncharted waters, the world is uncertain if it will sink or swim and can only watch with bated breath a they flail and kick to keep themselves afloat. While authorities throw hundreds of billion of dollars into the market, the People’s bank of China does its part by slashing interest rates to unprecedented lows, and the Communist Party pledges to do all it can to increase the yuan’s value and convertibility rate over the next four years.
George Soros says that it has been and will be difficult to get those interest rates back to a positive level and that the economic situation in China amounts to a crisis. George Soros urges investors to take extreme caution as the patterns, in his opinion and apparently that of the world’s, hark back to the 2008 deep recessions that the world still has not quite recovered from. Already, at least once by the first week of January this year, China’s stock market has shut down from loss and the world has lost $2.5 trillion in equities.