Manufacturing is in a slump and services will follow.
Even well-performing economies will be hit.
All because central banks inflated a credit bubble with low rates.
Now that the dollar is strengthening, imports into America will get cheaper compared to US exports. This will lead to low inflation or deflation in the future, eating into corporate profits.
Meanwhile, US corporations aren't being prudent in their spending.
They're borrowing to buy back shares in order to keep their share prices high.
Their debt is spiking as a result.
This can lead to some dodgy behaviour from executives, who have incentives to massage and inflate earnings figures. Companies that rely on a strategy of misleading investors will get found out eventually.
Meanwhile, Chinese companies are rushing to pay off their US debt, before the dollar strengthens anymore, making it too expensive.
As China rebalances, there's only one way emerging markets currencies are going —and that's down.
Investors in emerging market debt are getting crushed. The Morgan Stanley fund isn't alone in halving in value.
The losses could be huge. Here's how much banks are owed on investments in emerging markets. The question is – can they withstand losses?
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