Speaking of emerging market economies in the 1990s, we may be having a repeat.
This is from Sean Corrigan, chief investment strategist at Diapason Commodities Management.
Public sector surpluses in many [emerging markets’ have masked the fact that the private sector there has (a) acquired long term (unsaleable) USD assets with S-T USD funds which it cannot now readily access and (b) that far too many of the firms and individuals whoe were so effortlessly earning those dollars via exports have geared up further to take advantage of what looked like the one-way bet of a falling greenback borrowable at negative real interest rates…
Now this has all fallen apart, we now have a severe squeeze developing in parts of Asia, most of Latam, and all across E Europe and the FSU…
We seem to be adding a slow burning 1997-01 EM crisis on top of our Western woes… and, so far, there has been no concerted CB move to provide these people with the dollars they need, unlike in the developed nations….
Given that many are also reliant on commodity earnings this can’t help either, for this adds to their overreliance on bankrupt Western consumers and on widespread capital expansion in a booming world for their higher order goods sectors…
And, to hammer the point home, here’s a small (literally) selection of some emerging market currencies. You can’t see all the numbers, but trust us, it’s not pretty:
Related link
Banana Republic Britain - FT Alphaville
