You Should Fear the Emerging Market Debt Bubble

Bubbles are all bad,eventually.Good article.

Rigged Game

In today’s world of financial globalization, any remote crisis can become an international problem in seconds. That’s the reality of today’s markets.

By Nomi Prins and cross-posted from The Daily Reckoning

Global debt has ballooned since the financial crisis as central banks have distorted markets and fueled debt bubbles in particular.

A lot of the increase in global debt has come from emerging market (EM) economies, especially China. In fact, a record amount of EM debt has accumulated during the past decade, mostly in dollars. A large portion of that debt is therefore denominated in U.S. dollars.

That’s why I’ve long argued that the first shoe to drop in the next crisis would likely be EM debt.

Borrowing is not a problem when dollars are cheap. Low interest rates mean the cost of servicing that debt is low.

The problem starts when the Fed raises rates or the dollar strengthens…

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