The last three times Asian currencies collapsed against the US Dollar at this rate, the global financial system was shaken to the core. With China piling on this time, we wonder - what happens next, as a tsunami of deflation is exported towards the shores of the "we'll hike no matter what" Fed's American shores... What happens next? Note: USDollar strength relative to Asian currencies is indicated by a lower index - i.e this chart implies an USD per "Asian currency" rate - how many USDollars can an "asian currency" unit buy? A glance at the chart and one might wonder if this time is different... and we break the 18 year trendline. With Q3 GDP estimates tumbling, we leave it to SocGen's Albert Edwards to sum up what happens next... We have long believed that we are only one misstep from outright deflation in the west with core inflation in both the US and eurozone at just 1%. We expect the acceleration of EM devaluations to send waves of deflation to the west to overwhelm already struggling corporate profitability and take us back into outright recession. As investors realise yet another recession beckons, without any normalisation of either interest rates or fiscal imbalances in this cycle, expect a financial market rout every bit as large as 2008. His conclusion: "Low growth (and low inflation) to prompt more QE - everywhere!" h/t SocGen's Albert Edwards Chart: Bloomberg