Societe Generale strategist Albert Edwards may have finally out-beared himself. He warns the China devaluation is a step toward "a financial-market rout every bit as large as 2008."

In his new note, Edwards says the Chinese currency devaluation is the beginning of a period of serious foreign-exchange weaknesses in Asia.

This will force down import prices into the US and EU economies, aggravating a deflationary cycle that hits corporate profits and ending in a Lehman-style crisis:

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 realize yet another recession beckons, without any normalization of either interest rates or fiscal imbalances in this cycle, expect a financial market rout every bit as large as 2008.