Is there a new debt crisis on the horizon? by Zhu Ning published by Wold Economic Forum (9/2019).
“The US Federal Reserve governor, Jerome Powell, stated in the recent Jackson Hole meetings of global central bankers that the US economy is doing well at present and confirmed the continuation of interest-rate hikes in the foreseeable future.
Even though such a stance is probably already priced in by the global financial market and did not stir up too much of a global ripple, what happened in Venezuela and Turkey earlier this year still unavoidably remind global policymakers and investors of how fragile certain economies may become in light of the US’s interest-rate hike cycle.
After all, the 1998 south-east Asian financial crisis and 2008 global financial crisis are not that distant, historically speaking; coincidentally enough, both years end with the number 8, significant in some oriental cultures, just as this year does. Therefore, even a slight hint from the Federal Reserve about future interest rate trends would keep investors all over the globe on their toes.
Historically, the cycle of interest rate hikes by the Federal Reserve has been a key factor in the pricing and volatility of relatively risky and illiquid assets, such as fixed income securities issued and traded in emerging markets. If anything, recent turmoil in the global debt, equity and currency markets once again questions the viability and sustainability of the economic growth in some emerging economies and emerging financial markets…”
