Rising Yen Signals Danger

Downward Spiral

And now the PBOC is using external appeals, though they make it sound as if they are moving toward “liberalization.” Instead, put altogether like this, it looks increasingly the case that the PBOC has run out of resources; they have reached the end of their liquidity tether, having blown through since March last year what was likely left of their abilities. I don’t know for sure that is the case given the awful opacity and hidden components, but my gut tells me that what was desperate trouble in March is something much more serious now.

One piece I keep coming back to is Japan. The fact that Japan and yen are now more closely tied than ever signals, to me, further anecdotal suggestions along these lines. It isn't quite evidence because I would prefer to establish a chain of data the fixes one end of the Asian "dollar" to the other (Japan to China and back again), and so far it has proved quite difficult to accomplish. But when you put all these pieces together, especially the very important money market data, both here and there (subscription required), the compelling narrative that leaps out is a downward spiral.

I think the PBOC is truly running out of options. If they were so fraught in the five months after March to have abandoned intentional redistribution, and then completely pancaked by the "dollar" in August, what are they now, having done all that they have done and to no gain? The "dollar" still runs and it sounds very much to me like the first cry for international and global help.