The sone maybe Don’t Cry for Me Argentina, but it applies to the entire world for what happens in Argentina is merely the beginning of the global debt crisis. We can see from the chart that the dollar has been soaring. However, the Array picked August as the Panic Cycle and that has been spot on. Unfortunately, it does not look like this is going to calm down. We may be headed into a real Emerging Market crisis by October.
The reason why we are able to forecast such events well in advance is rather common sense. As I have said before, every solution to a crisis sets the stage for the next crisis. The Emerging Market debt crisis is unfolding because central banks in the USA and Europe lowered interest rates to “stimulate” the economy and they have no idea about how an economy truly functions. This is all based upon Keynesianism which is in turn based upon an isolated theory of the economy. They never consider that you lower interest rates and there are pensions who simply need higher rates to break-even. Then emerging markets issued debt in dollars with higher yields for the pension funds bought it assuming there was no currency risk. Now we have Portuguese and Spanish banks who would not lend to their domestic economies for there were way too many nonperforming loans so they ran and bought Turkish debt.
What began in Argentina and Turkey has snowballed into broader collapse complete confidence in Emerging Market debt and the pension funds stopped buying and simply are now trying to get out as fast as they can. This now has officials in Indonesia, India, South Africa, and Brazil scrambling to protect their economies. The debt party is over! The ECB has created a global nightmare for so many European institutions ran into emerging markets because the ECB maintained
NEGATIVE rates. Draghi has created a global debt crisis and now he himself is trapped. This is why Italy now wants to change the structure of the ECB so they can buy member debt directly rather than in the secondary market which they have destroyed. Draghi cannot stop Quantitative Easing for the 28 member states will be unable to sell their new-issue debt at rates that are similar to the current levels. Rates will soar in Europe if Draghi actually stopped buying and then we will see a global debt crisis you cannot imagine.
