Not so long ago, a big Chinese currency devaluation seemed both inevitable and imminent. The story went like this: China had borrowed tens of trillions of dollars in response to the Great Recession and squandered much of it on uncompetitive factories and ghost cities. The companies and governments that own these worthless assets were about to go broke en masse.

China would, as a result, have no choice but to cut the yuan’s value by as much as 40% to make domestic debts manageable and export industries competitive. Hedge funds, led by Hayman Capital’s Kyle Bass, were gearing up to bet billions on this event.

There’s much, much more in Bass’ letter, all of it pointing to an epic crisis in which the exposure of China’s fake growth numbers, historically-unprecedented levels of malinvestment and evaporating foreign exchange reserves combine to force a devaluation.

But apparently not quite yet as the Yuan just hit its highest level against the US Dollar since December.

John Rubino--Welcome To The Currency War-Part 22 #3015

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