Barack Obama’s failed domestic “economic recovery” policies, combined with the failed economic policies of one of our largest trade partners, Red China, led to a cascading collapse in world markets this week. For years, Chinese economic growth was a cornerstone of U.S. and world market hopes for improvement. However, for the last two years, the failure of China’s communist central economic planning has become painfully apparent, concluding with China’s devaluation of its currency in mid-August. The consequences are significant for both the Chinese people and the rest of the world.

In a spurt of six days, the Dow Jones Industrial Average dropped 11%, though stocks rallied Wednesday. Analysts contend that the early-week selloff was prompted primarily by China’s lowering of interest rates for the fifth time since last November, indicating that the Chinese economy, already in bad shape, hasn’t responded to measures taken to this point.

Presidential hopeful Carly Fiorna said, “I’ve been expecting a correction for some time now because the underlying fundamentals of the U.S. economy are not that strong.” Thanks again to the Obama “recovery.”

That said, second-quarter GDP grew at 3.7%, up from the previously reported 2.3%. We wonder if the next revision won’t settle somewhere in the middle, but that is finally some good news.

The bad news for the American market is, since Aug. 17, more than $2 trillion in market value has been wiped out.

The losers are the increasingly small number of individuals who have enough discretional money to invest in the market plus big institutional investors, such as banks, insurance companies and investment funds. Thanks to the Federal Reserve, the real losers are people who can only afford to put away $50 or $100 every month or so. Because of the Fed’s quantitative easing and keeping the prime interest rate at zero, the best interest rate offered on a savings account is still below 1%. You’re better off putting your cash in a coffee can where you can at least access it on a weekend. That is if you can afford the coffee in the first place.

The Shanghai Composite Index lost 8.5% on Monday and then 7.6% on Tuesday. One of investors’ favorite sectors is stocks of foreign nations whose economies are strong. Until recently, China was a big favorite of these investors, but with the news of its government devaluating the yuan, those holding Chinese securities stampeded to sell. That touches off a whole range of other actions, similar to but not as bad as a bank panic. The rush to dump Chinese stocks causes investor nervousness about all foreign securities, even those of economic powerhouses like Chile. Then comes a broad scale selloff of all stocks by those who’ve either been burned before or just never really trusted the stock market. Even when overall fundamentals are strong, as in the Dot Com debacle, many good companies are hurt.

Like the U.S., China’s primary problem is debt, both governmental and private. It might sound strange that China owes itself money, but the fact remains that the money was lent, spent and a debt incurred. The central government lends money to local governments to build, often on a grand scale, cities, flood-control projects, theme parks and other things, and many are now sitting unfinished because the local governments ran out of money and the central government won’t send more. The people who would’ve finished them have moved on to other places.

Meanwhile, the Federal Reserve board of directors and some of the world’s elite economists are meeting this week in the foothills of Wyoming’s Grand Tetons. Originally anticipated to consider raising the prime interest rate, the Fed is no longer likely to do so due to the yuan devaluation. In addition, the members seem little concerned about the stock market. “I think the Fed doesn’t care that much about the [market] volatility, but they would care about the direction,” said Maury Harris, chief U.S. economist at UBS. “If you were consistently headed down, that would be bothersome to the Fed as a negative economic signal.”

Despite Fed denials, the effects of the Chinese economy, especially its continuing and spreading problems, is certain to be discussed more than once. Although the Fed long ago lowered the interest rate as far as possible, the delegates have considerable influence in all economic circles, and they will push for whatever reforms they deem best. Let’s hope they’ve learned the lesson that QE’s are counterproductive.