We started with trade wars, moved to currency wars and now are in economic war. Turkish President Erdogan uses the term as he rails like King Lear against the storm. The difference maybe just words but the sentiment is that all tools are available for retaliation. The sanctions from the US on Russia and Turkey are being blamed for the spark that caused this ongoing risk-off panic spread. The collateral damage is in ZAR where the currency is off 2.4% to 14.43 but touched 15.55 early. ARS is also reopening its wounds off another 4% to 29.22 now after touching 29.401 early.

The root causes matter but the tinder for the present fire of fear has plenty of global fuel as investors rush to unwind long carry, long credit and short volatility trades everywhere. Whether today is a bottom or the capitulation moment for all risk positions won’t be clear for another few weeks. It’s not a bottom until you hit something. Perhaps it’s not a war until an economy fully crumbles – but given that TRY is off another 7% with 7.236 highs followed by intervention to 6.4469 and the inevitable bounce back, now 6.85 – it’s getting close if FX is the national barometer for economic health. The Turkish Central bank announced that banks would be provided all needed liquidity, collateral deposit limits were cut and banks were allowed to borrow FX deposits in 1-month maturity – effectively freeing up $6bn of liquidity and $3bn in gold. This works until the money runs out.Others are using the term economic war beyond Turkey. The US. is aiming for an “economic war” rather than trade war to restrict China’s right to technological development, as the USD50 billion tariffs mainly target industries related to the development-focused “China 2025″campaign the 21st Century Business Herald said in a commentary. All of these point about economic war show up in markets today beyond EM FX.The sea of red for equities, the bid to bonds, the rise in volatility and the unwind of carry trades.

The game for today is going to be in watching for more headlines from Trump or Turkey or Russia or China as they now play beyond trade and currencies. The risk for USD intervention is on the rise accordingly. The best way to measure a panic in 2007-2008 was with AUD/JPY – watching 80 today maybe the right place to start if we are truly facing an economic war front.