start with a country that, for whatever reason, became a favorite of foreign lenders, and experienced a large inflow of foreign capital over a number of years. Crucially, the debt thus incurred is denominated in foreign currency, not domestic (which is why the U.S., also a recipient of large inflows in the past, isn’t similarly vulnerable — we borrow in dollars).
.. Whatever the shock, the crucial thing is that foreign debt has made your economy vulnerable to a death spiral. Loss of confidence causes your currency to drop; this makes it harder to repay debts in foreign currency; this hurts the real economy and further reduces confidence, leading to a further decline in your currency; and so on.
.. Indonesia came into the ’90s financial crisis with foreign debt less than 60 percent of GDP, roughly comparable to Turkey early this year. By 1998 a plunging rupiah had sent that debt to almost 170 percent of GDP.
.. How does such a crisis end? If there is no effective policy response, what happens is that the currency drops and debt measured in domestic currency balloons until everyone who can go bankrupt, does. At that point the weak currency fuels an export boom, and the economy starts a recovery built around huge trade surpluses.
.. stop the explosion of the debt ratio with some combination of temporary capital controls, to place a curfew on panicked capital flight, and possibly the repudiation of some foreign-currency debt.
.. get things in place for a fiscally sustainable regime once the crisis is over.
.. Malaysia did this in 1998; South Korea, with U.S. aid, effectively did something like it at the same time, by pressuring banks into maintaining their short-term credit lines. A decade later, Iceland did very well with a combination of capital controls and debt repudiation (strictly speaking, refusing to take public responsibility for the debts run up by private bankers).
.. Argentina also did quite well with heterodox policies in 2002 and for a few years after, effectively repudiating 2/3 of its debt.
- .. You need a government that is both
- flexible and
- responsible, not to mention
- technically competent enough to implement special measures and
- honest enough to carry out that implementation without massive corruption.
Emerging-market companies are binging on U.S. dollar debt and that could become a source of trouble in some parts of the world if growth slows, interest rates rise or the dollar resumes its ascent.
.. U.S. dollar debt stood at $3.6 trillion in emerging markets through the third quarter of 2016, an all-time high
.. a bout of investor risk aversion could expose $135 billion worth of corporate credit to repayment problems.
.. If the dollar appreciates faster than expected, some corporate borrowers, especially those who derive their revenues largely in local currencies, could find themselves in a currency mismatch and be forced to ask the central bank for help—which not all central banks are positioned to do.
.. Countries such as India and the Philippines, which have relatively low stocks of external debt and healthy foreign-exchange reserves, are in better shape, analysts say. Economies such as Malaysia and South Africa, which have small currency reserves and high levels of dollar-denominated debt, are at particular risk. Venezuela and Turkey look especially vulnerable.
.. Venezuela’s state-run oil company PdVSA was late on its coupon payments worth $404 million in November, in an apparent struggle against low oil prices and falling foreign-exchange reserves.
.. “There are potential vulnerabilities looking further ahead, particularly if the Fed were to raise rates much more aggressively than what the market has priced at the moment,”
This was not first attempt on Kim Jong Nam’s life. Five years ago, when he took power, Kim Jong Un issued a “standing order” to have his half brother assassinated, South Korean spy chief Lee Byung-ho told lawmakers in Seoul on Wednesday.
.. One attempt, in 2012, prompted Kim Jong Nam to send a letter to his younger brother pleading with him to “spare me and my family,” lawmakers were told.
.. Black sedans bearing North Korean diplomatic plates pulled up outside the general hospital, and the North Korean ambassador to Malaysia, Kang Chol, emerged from one. He refused to speak to reporters.
.. Police said the North Korean diplomats had tried to stop the autopsy, insisting that the body be released to them.
.. A Malaysian police official told local reporters only that the poison was “more potent than cyanide” but declined to say what exactly it was.
.. one driven by a visibly upset young man in his 20s wearing a pink T-shirt — perhaps Kim Han Sol, the most visible of Kim Jong Nam’s six children.
But her choice soon became something else, as well: a lucrative source of attention for herself and her multimillion-dollar online-retail startup, FashionValet, which already sold hijabs and later came to include her own line of scarves and a stationery brand. Yusof is now among the growing number of Malaysian women who are trying to revolutionize the hijab’s contentious image. While the scarf has tended to be viewed primarily as a marker of Islamic duty and identity, and sometimes, especially in the West, of female subjugation and oppression, in Malaysia women are free—even encouraged—to inject glamor and prestige into the hijab, and to make money from it.
.. In her posts, she tells readers that choosing to wear the hijab should be an upgrade to their lives. “She is changing the whole reputation of the head scarf,” Farah Alia Razali-Tyler, a law graduate, told me. “When people thought of the hijab, they thought, ‘I don’t want to look like a makcik’ ”—a frumpy older woman. “Now they’re saying it’s okay to be more modern.”