It has been noted that as a result of the US Federal Reserve tapering down the release of funds into the US economy, “hot money” is being pulled out of emerging markets territories by investors seeking safer and more stable investment havens.This in turn is now causing currencies to collapse and interest rates to soar in emerging markets countries all over the globe, causing levels of currency decline not experienced since the financial crisis of 2008. Fears are being expressed that a severe consequence of this could be the catalyst for global currency collapse.
And as though the projected extension of the emerging markets crisis into a global one isn’t bad enough, there are growing problems in the Chinese banking system that could also contribute to the wider financial crisis. According to Charlene Chu, one of the most respected analysts of China’s lenders:
“One of the reasons why the situation in China has been so stable up to this point is that, unlike many emerging markets, there is very, very little reliance on foreign funding."
So what exactly would all this mean for the average “global Joe”? The potential effects on emerging markets nations and the global ripple effects are likely to be particularly devastating - the slashing of jobs and wages, civil unrest, widespread food shortages, rationing of utility supplies and panic bank runs would be some of the expected outcomes.