19 August 2015   Leave a comment

Emerging markets are one of the most vulnerable of all in the process of globalization.  Over the last few years, emerging markets have borrowed much money in dollars, driven by the fact that interest rates in the US are so incredibly low (essentially zero).  Now, however, as the Federal Reserve Bank has begun to make noises about “normalizing” interest rates, raising them slightly in order to prevent an outbreak of inflation that could be a result of the easy money policy of the recent past.  The threat of higher interest rates, however, has led to a flood of money leaving the emerging markets–a situation that would threaten their stability.  The Financial Times has estimated that the outflow of money from the emerging markets into the US has reached $1 trillion–a very dangerous outcome if it persists.  Many of these countries will be forced to devalue their currency, a process that has started with China, Vietnam, and Turkey.

The developing el Niño could be the strongest ever recorded (although, to be fair, records only go back to 1950).  The temperature of the eastern Pacific along the South American coast rises during an el Niño event with consequences for many other areas of the world.  If California is lucky, it will get heavier rains (although those rains will bring the probability of mudslides).  Australia and Indonesia will likely experience drought.  In the US east, wind shears from the event will most likely minimize the frequency of hurricanes in the Atlantic.

The refugee crisis in Europe affects all states.  Bulgaria is trying to cope with a large influx of refugees, but its resources are stretched quite thin.  Bulgaria is building a fence (as is Turkey and Hungary) but such efforts merely make the transit of refugees more dangerous, not less likely.  Such barriers also increase the ability of traffickers to take advantage of these vulnerable people: a lucrative activity for the traffickers, but a tragedy for the refugees and migrants.   Europe has to come up with a more systematic response to this crisis.

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Posted August 19, 2015 by vferraro1971 in World Politics

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