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Meanwhile, In China: A Cash Crunch
China engineered a pretty epic cash squeeze this week.
Liquidity withdrawals over the past several days stoked fears of tighter policy at a time when the market was already concerned that relative strength in the world's second-largest economy was emboldening the PBoC, which has made no secret of its desire to dial down accommodation, exercise "prudence," and otherwise normalize policy now that the pandemic has subsided.
The central bank's efforts to drain liquidity drove up interbank rates, a
an interesting juxtaposition with the US, where regulators are spinning equities plates.
A question for people smarter than me; what do you see when you look at China through an MMT lens?
Very good question, sir. Perhaps that’s the lens they have been using for some time. We worry about their debt all the time. Do they?
Interesting question. I think it’s a big part of their playbook. But with MMT, the main release valve is probably the currency exchange rates, which they also manipulate so it’s hard to get a clear picture.