DollarCollapse.com

It's Coming...

AST Article Initializer + Top Leaderboard

  • Home
  • About
  • Breaking News
  • Top Ten Videos
  • Articles
    • Creeping Fascism
    • Currency War
    • debt
    • Dollar
    • Economy
    • inflation
    • Monetary policy
    • Money Bubble
    • Precious Metals
    • Stock prices
  • Buy Gold And Silver
  • Join The Email List
  • Contact

A Spiking Dollar = Emerging Market Chaos, Part 2: The Story In Four Charts

by John Rubino ◆ June 3, 2018 4 Comments

For most of the past few years, emerging market stocks and bonds were among the favorite investments of everyone from hedge funds to pension funds to retirees.

Now, not so much.

The next two charts (courtesy of Saturday’s Wall Street Journal) show the huge recent run ending in January, to be replaced by a full-on rout.

emerging market stocks

emerging market bonds

What happened? Well, it turns out that a big part of the apparent success of economies like Argentina and Indonesia came from their ability to borrow in international markets – frequently in US dollars – and use the resulting cash to build roads, bridges, airports, and soccer stadiums — that is, things that imply visible progress. Visitors came, saw all the “modernization,” went home impressed and hit “buy.”

But then US interest rates started to rise and the dollar spiked off of its recent lows. Treasury bonds suddenly started to look attractive relative to EM securities, while all those EM dollar debts began to look onerous rather than wondrous. The hot money decided to leave, putting downward pressure on EM currencies (which makes dollar-denominated debt even harder to pay off) and forcing EM central banks to tighten monetary policy and raise rates.

emerging market currencies

emerging market interest rates

The result? Contraction where once there was limitless growth, and instability where there was rock-solid continuity. Emerging markets have been here before, of course, and history teaches that it will get worse before it gets better.

History also teaches that trouble on the periphery frequently moves towards the center to threaten developed world institutions that were buyers of all that EM dollar debt. Hedge funds, pension funds, bond funds, global stock funds, and major-bank prop trading desks, are all on the hook for Brazilian, Argentine, and Mexican paper, which means – history again – that US taxpayers are actually the ones on the hook.

So watch for apocalyptic headlines as the 1% softens the rest of us up for yet another transfer of wealth from middle to top.

 

Emigrate While You Still Can

Share this:

  • Click to share on Twitter (Opens in new window)
  • Click to share on Facebook (Opens in new window)
  • Click to share on Google+ (Opens in new window)

Related

AST Article Right Rail 1 + Jay Taylor ad after social media buttons

AST Article Right Rail 4

AST ROS Right Rail 4

Birch Gold Ad

The New Currency to Crush the USD

 

The New World Money to Crush the U.S. Dollar

The Social Security Crisis that Millions of Americans Don't See Coming

 

The Social Security Crisis that Millions of Americans Don't See Coming

Trump Just Shared These 11 Words of Warning for the USD and Gold

 

ALERT: Trump Just Shared These 11 Words of Warning for the USD and Gold

Millions to be Hit Hard by this U.S. Scheme to Confiscate Your Savings

 

Millions to be Hit Hard by this U.S. Scheme to Confiscate Your Savings

The Sneaky IRS Tax Law that's Sweeping the U.S.

 

The Sneaky IRS Tax Law that's Sweeping the U.S.

Jeanette

Lear Capital Ads

The New Currency to Crush the USD

 

This Is the Most Misunderstood Investment

The Social Security Crisis that Millions of Americans Don't See Coming

 

Find out if Owning Silver Is Right for You.

Trump Just Shared These 11 Words of Warning for the USD and Gold

 

7 Things You Need to Know about Investing in Gold

Millions to be Hit Hard by this U.S. Scheme to Confiscate Your Savings

 

The Investment World’s Best Kept Secret

The Sneaky IRS Tax Law that's Sweeping the U.S.

 

Gold Is On Sale! Are You Missing Out?

American Bullion

Money Bubble

Whatfinger

Rubino video ad for Lear

Lanista

Bullion Vault

GoldMoney


Goldmoney Wealth

Buy Gold And Silver

Buy Gold and Silver


Birch Gold Group

Lear Capital

American Bullion

GoldBroker

Bullion Vault

GoldMoney

Talk Markets

Google code for remarketing tag

Jay Taylor ad after fourth post preview

AST Article Below Post

Hyperlink article ellipses, resize images, truncate previews

Gold price chart

Silver price chart

Dollar index chart

Coindesk Bitcoin

AST Article Broker Buttons

Whatfinger

Buy Gold And Silver Here

Buy Gold and Silver


Birch Gold Group

Lear Capital

American Bullion

GoldMoney

GoldBroker

Google

Google 2




Bullion Vault


Goldmoney Wealth

Copyright © 2019 · DollarCollapse.com