two moons
turning the tide
markets according to Michael power
strategist
investec china's dwindling demand for
the resources exported by developing
nations is an old narrative years of
declining growth rates and rising
unemployment have caused lasting damage
across the emerging world but it's the
other moon represented by the US Federal
Reserve which is now causing particular
consternation the Fed is the definitive
source of global financial liquidity and
the surge in lending to developing
countries that propelled much of their
growth in the last 15 years has now come
to a halt this may give way to a vicious
circle of deleveraging according to the
bank for international settlements which
is known as the central bank of central
bank's
the developing world accounts for more
than half of global economic growth
their misfortunes cannot but rebound
upon the west the total stock of
dollar-denominated credit in bonds and
bank loans to emerging markets was three
point three trillion u.s. dollars at the
end of sep tember that's down from three
point three six trillion u.s. dollars at
the end of june and the irresistible
allure of cheap credit inspired
households from brazil to thailand and
turkey to spend beyond their means
injecting more liquidity into an
engorged financial system with
quantitative easing may now be doing
more harm than good in the developing
world
investors are deserting emerging-market
assets in droves capital outflows hit an
estimated 735 billion u.s. dollars last
year that marked the first year of net
outflow since 1998 according to the
Institute of International Finance
Christine Lagarde managing director of
the International Monetary Fund warned
last week of the threat to global growth
that an impending crisis in the emerging
markets would pose