I’m not sure why this isn’t getting more attention in this forum, but the wheels of a major global financial collapse are in process this very moment. The tl;dr summary: credit is suddenly tightening due to slower economic growth in China and fears of Central Banks in Europe and the USA ending their “easy money” policies. The result? Massive capital flight by elites out of countless so-called “emerging markets” (read: poor countries) to supposedly safer countries such as Japan and the United States.
Here’s the problem: currencies are dropping globally in these poorer countries, jacking up inflation and slowing economic growth as their populations cannot afford basic goods and services. Furthermore the countries are hamstrung since they must service outrageously high debts before implementing any temporary stop-gap spending to stimulate economic growth. The slower economic growth across billions of people across the world will likely fuel slower economic growth in the so-called “advanced economies” (that is, Europe, the USA, and the rest) as well as risk aversion by firms globally.
I’ve been following financial news (as a part-time adviser) for over a decade and this is looking bad, bad, bad. Argentina’s currency is dropping more than it has in a decade; same for multiple other countries. The sheer scope of the capital flight is astounding: South Africa, Indonesia, Turkey, Argentina, Ukraine, Bulgaria, etc. This is going to make the 1998 Asian financial crisis look like a walk in the park.
The frustrating part? The easy credit policies of Central Banks are a chief culprit, since this has predictably fueled risky investments in the poorer countries of the world. Combined with zero capital controls (due to secret “free” trade deals), major firms can just yank capital out of these poorer countries, resulting in financial collapse.
It’s going to be a CRAZY week ahead.
Capital Flight Out of Developing Countries
See on www.reddit.com