As the savings built up from America's post WWII economic power and production have gradually been used up by consumerism, inflation and adventurism (endless foreign war economy), the pendulum swings toward balance - and beyond. A stronger yuan and a weaker dollar are characteristic of that dynamic.
Maturing generations of the U.S. can no longer sustain the former consumption of Chinese-made products. China has more promising customers elsewhere, including within their own borders. They have equitable trade partners and a growing middle class which holds much true wealth in the form of savings (much as the U.S. middle class once did).
The U.S. must now become a producer nation (if it can, a tall order) with a relatively weaker national currency. The global dollar reserve and unit of account is still very deep in financial markets, but the virtual reality of financial markets was never designed to sustain the physical world.
As the pendulum swings, we see the result of the first systemic test of volatility reversal. As complacency had been traded as an asset for so long, one could say that inverse volatility was "due for a correction" just as much as equities.
Now that the FED is seriously testing the gradual withdrawal of QE and the reduction of its balance sheet, volatility is probably the product to trade long for now. But as the CBs slowly sell off, equity indices will follow suit. Retail advisers will talk their "long term strategy book" but the true future for equities is a bumpy down trend with reassuring bounces. All according to BIS design, with it's US dollar CB making the first move. It's other CBs will follow.
As the pendulum builds momentum it will surely pass it's intended resting place and overcompensate for past imbalances, but the global financial system will not melt down in some post Apocalyptic crash. We even have a balance-structured SDR as a relief valve mechanism.
While some held that dollar prices would hyper-inflate for all items in the physical world from wheat to pork bellies to real estate and oil, there are really only two asset classes that need to hyper-inflate: financial paper (derivative speculation) and gold.
Humanity probably cannot survive a world where dollar holders pay $75 for a loaf of bread or $2600 for a barrel of oil. But we can survive a world where gold trades for $52000/oz.
You see, only gold needs to hyper-inflate in US dollar terms to solve the worldwide dollar imbalance problem. And our dollar denominated paper gold pricing system is in a perfect position to accomplish this. At a 4000% increase from today's dollar price, gold will flow to where it is needed to balance dollar debt in international trade and the financial market derivatives which currently enable the structural imbalances of the status quo. With this in mind, please reread the first paragraph above.
As no one can predict the future, Roacheforque cannot provide assurances - only likelihoods. A high dollar price of gold solves many dollar problems, and enables the continuation of the current system under a new global unit of account. Likewise, the position of gold today seems structured to allow for those solutions.
How fast the pendulum swings, where it lands and where you will be as it moves from point to point are questions that make life interesting. In the end, perhaps sweetness follows.
As the flower of understanding reveals - we live in interesting times indeed.