This can't end well - Emerging markets

[CheeseSlice]

Last week it was the Argentine Peso, now the Turkish lira:

BBC News - Turkish central bank raises lending rate to 12%

Turkey's currency had been losing value as investors sold off their lira in favour of foreign currencies amidst ongoing turmoil in emerging markets.

A lean toward the 'negative' view of this analysis from yesterday?:

Argentina Rout: Which Emerging Markets Are In The Firing Line? - Forbes

The negative view is that we are now in a period of unavoidable contagion through which all these economies, and then other emerging markets, will enter a spiral. In this spiral, investor concerns trigger outflows from those countries, which exacerbate their existing problems, and so we go on in to crisis. Although BIITS its a lazy and convenient abbreviation which brings together some diverse economies with different challenges, those countries do have some things in common: current account and fiscal deficits – both, in most cases – and doubts about the levels of foreign currency reserves they have relative to their short-term borrowings. As I discussed here, five countries – Turkey, South Africa, Chile, India and Indonesia – only had enough reserves in the second half of last year to cover one year of their short term financing requirements, and Hungary, Brazil and Poland, two. And most of those reserves have declined significantly since then: Turkey’s central bank is believed to have poured as much as one tenth of its foreign currency reserves into the market in support of its currency, without any clear success.

The positive view is that Argentina is a special case (CS comment: Ok, positive view is cancelled then ), and although markets are naturally made nervous by an event like this, they will eventually recognise that Argentina’s problems are not replicated elsewhere (except arguably Venezuela). Confidence in Argentina has fallen because of a host of situations that do not apply in India, or Russia, or Turkey or elsewhere: Argentina faces more international law suits than any other country from companies and sovereign states around the world. It still holds debt in default and has not yet agreed terms for its repayment. It has nationalised companies and scared off foreign investors – see my account of the Repsol situation here - and in doing so it has exacerbated its existing problems with foreign currency reserves relative to outstanding

Interesting that India is in that list, I thought they were doing OK with their own space program and all.

[xoggoth]

This is not really new news but maybe it's only now getting into the mainstream press. Turkey is something of a special case too, due to rising unrest there but there is a more general problem due to the US winding down stimulus.

Falling growth in China is bound to affect the third world also, especially those African countries whose improvement in recent years has been almost entirely due to Chinese investment in return for raw materials.


PS Argentina! Oh dear what a shame!

[AtW]

Interesting that India is in that list, I thought they were doing OK with their own space program and all.

Space programs ain't exactly source of revenue at the moment, perhaps in 50 years India will be mining gold from asteroids though...

[TykeMerc]

Space programs ain't exactly source of revenue at the moment, perhaps in 50 years India will be mining gold from asteroids though...

True, but running a space programme which can only be described as discretionary spending isn't exactly an indication of poverty.
It's true there is a market for launch vehicles for commercial and military satellites, but it's not massive, it's rather specialised and when it comes to the military market there are a lot of rules applied by the nations that use them so entry to that market is far from trivial.