{"id":37424,"date":"2018-09-06T06:48:28","date_gmt":"2018-09-06T11:48:28","guid":{"rendered":"http:\/\/olduvai.ca\/?p=37424"},"modified":"2018-09-06T06:48:28","modified_gmt":"2018-09-06T11:48:28","slug":"emerging-market-debt-crisis-a-reality-check","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=37424","title":{"rendered":"Emerging Market Debt Crisis \u2013 A Reality Check"},"content":{"rendered":"
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Emerging Market Debt Crisis \u2013 A Reality Check<\/a><\/h3>\n<\/div>\n
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QUESTION:<\/strong>\u00a0 Hello Martin \u2026 I follow emerging markets closely and one thing I note is that the size of the sovereign forex-denominated debt burdens are quite small relative to GDP except in the case of Argentina (48%). Everybody else, including Turkey and Indonesia) is 11% or less. How can you have a debt crisis if everybody is clearly able to service their debts? That\u2019s what confuses me. Today the Bloomberg EM dollar debt index is at 6.05% \u2014 whereas in 1998 it was 17%! That is saying the risk is still fairly subdued no?<\/p>\n

Thank and regards,<\/p>\n

MC<\/p>\n

\"\"<\/a>ANSWER:<\/strong> There are at least three major factors that are not calculated in this perspective. The dollar debt rises exponentially in the cost to service that debt as the currency declines. It was that very relationship which sent Germany into hyperinflation during the 1920s.\u00a0Germany had to print more money to make reparation\u00a0payments and the more they printed the worse it\u00a0became.\u00a0If you look closely, Turkey\u2019s external debt has grown 10% just in the past year alone as its currency has declined and interest rates have risen.<\/p>\n

Next, we have the rising interest rates which add\u00a0to the crisis further undermining the economy. The interest must be paid in terms of the foreign currency. Also, keep in mind that they have also issued external debt in euros.<\/p>\n

The third dimension of Emerging Market Crisis<\/strong> is private. In the case of Turkey, in particular, this debt crisis differs significantly in one very critical\u00a0manner. We are not looking at purely as\u00a0crises fueled primarily by government debt. Much of the private debt of corporations have also borrowed in dollars and euro. This makes the crisis very problematic. There can be no IMF bailout for all the outstanding private debt in foreign currencies.<\/p>\n

\u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Emerging Market Debt Crisis \u2013 A Reality Check QUESTION:\u00a0 Hello Martin \u2026 I follow emerging markets closely and one thing I note is that the size of the sovereign forex-denominated debt burdens are quite small relative to GDP except in the case of Argentina (48%). Everybody else, including Turkey and Indonesia) is 11% or less. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[5496,195,4106,1732,5479,839],"class_list":["post-37424","post","type-post","status-publish","format-standard","hentry","category-economics","tag-armstrong-economics","tag-debt","tag-debt-crisis","tag-emerging-markets","tag-martin-armstrong","tag-us-dollar"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/37424","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=37424"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/37424\/revisions"}],"predecessor-version":[{"id":37425,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/37424\/revisions\/37425"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=37424"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=37424"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=37424"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}