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The Real Source of Emerging Market Stress

The Real Source of Emerging Market Stress
Investors watch stock prices on screens at a securities company in Beijing on Feb. 25, 2016. Chinese stocks and emerging market currencies are a sea of red for 2018 because of U.S. dollar liquidity tightening. Fred Dufour/AFP/Getty Images
Daniel Lacalle
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Last week, emerging markets experienced the highest outflows since September 2015. Even the Chinese market and its currency have completely roundtripped from the January highs.

The reason: Emerging markets, according to the Bank of International Settlement, have more than doubled their debt issued in U.S. dollars in the past decade, reaching an all-time high of $7 trillion including derivatives.

Daniel Lacalle
Daniel Lacalle
Author
Daniel Lacalle, Ph.D., is chief economist at hedge fund Tressis and author of the bestselling books “Freedom or Equality” (2020), “Escape from the Central Bank Trap” (2017), “The Energy World Is Flat”​ (2015), and “Life in the Financial Markets.”
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