Will The Fed’s Tightening Trigger Another Crisis?

By Arkadiusz Sieron – Re-Blogged From http://www.Gold-Eagle.com

The recent currency and debt crises in Argentina and Turkey raise questions about the condition of the global economy in general and the emerging countries in particular. Are they merely isolated events without broader implications or are they canary in the emerging market mine?

This question is timely and worryingly justified in the context of the ongoing Fed’s tightening cycle and the ECB’s shy steps toward normalization of its monetary policy. Historically speaking, the Fed’s tightening used to end with some sort of market crisis, including U.S. recession and turbulences in the emerging markets which rely heavily on dollar-denominated debt (as a reminder, the dollar lending outside the U.S. stands at about $11 trillion today). As one can see in the chart below, practically all recessions in America occurred after the Fed’s tightening cycle.

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