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Thursday, 24 May 2018

Paul Krugman jumps on EM Zombie Apocalypse bandwagon

With our random sappiness out of the way, may we just say while it could be the lack of coffee speaking, but: We’re getting a little bit tired of the wall-to-wall coverage of the Emerging Markets Zombie Apocalypse?

Nobel Prize-winning economist and columnist Paul Krugman got in on the party yesterday suggested we could be looking at a 1990s Asian financial crisis-style meltdown, which Bloomberg helpfully notes saw “developing-nation stocks [slide] 59 percent and governments [raise] interest rates to exceptionally high levels.” Krugman wrote on Twitter: “It’s become at least possible to envision a classic 1997-8 style self-reinforcing crisis: emerging market currency falls, causing corporate debt to blow up, causing stress on the economy, causing further fall in the currency. … Are we seeing the start of another global financial crisis? Probably not — but I’ve been saying that there was no hint of such a crisis on the horizon, and I can’t say that anymore. Something slightly scary this way comes.”

As of now, Bloomberg adds, a dozen EM currencies have tumbled more since February than they did during the 2013 taper tantrum, such saw its five-year anniversary on Tuesday.

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