This is an insightful article by leading economist Carmen Reinhart. She claims that as central bankers and finance ministers gather for the IMF’s annual meetings in Lima, the emerging world is rife with symptoms of increasing economic vulnerability. Reinhart points out that some of those symptoms, like slowing growth, are obvious and quantifiable – but others are dangerous partly because they are difficult to discern.
Source: The Hidden Debt Burden of Emerging Markets by Carmen Reinhart – Project Syndicate
On the surface, the emerging markets are suffering because of slower growth in China and weak commodity prices. However, this article looks at the risk of bilateral loans from China to the developing world.
For another excellent insight into the risks in emerging markets, take a look at this latest viewpoint from the Economist.
Ultimately, I guess it all depends on the economic outlook for China – personally, I’m optimistic.
Like Dr Alf, I am optimistic too because as the Chinese ambassador said last night on Channel 4 whilst making mincemeat of the left wing news presenter Jon Snow, the fundamentals of the Chinese economy were strong.
The last banking crisis was of course an engineered collapse designed to look like something that the public throughout the world had caused through their own profligacy supposedly egged on by bankers recklessly lending money to people with no prospect of repayment.
This is why before the crisis there was plenty of money but during it there was supposedly none followed by a situation in which the top 1/10th of 1% of people suddenly doubled their money and had it all transmuted into gold bullion, buy to leave properties, fine art, gems and expensive real estate.
There will be a repeat of this at some future point but the Chinese are better prepared than they were the first time as are many of the developing countries.
This does not mean that the financial wolves have been bested but since more people know who they are,how they operate and to a certain extent how they think the road ahead for them is a little harder although the right wars, provided that they are containable, can provide the opportunity they seek.