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What We Read Today 05 February 2014

Econintersect: Every day our editors collect the most interesting things they find from around the internet and present a summary "reading list" which will include very brief summaries of why each item has gotten our attention. Suggestions from readers for "reading list" items are gratefully reviewed, although sometimes space limits the number accepted.

Today our focus "behind the wall" is on emerging markets.

Today we have ten articles about emerging markets 'behind the wall'.

  • Emerging marks (S.C., The Economist) "Marks" is a play on words ("markets"). The Economist reviews the question of "dollar imperialism" and the undesired effects of Federal Reserve actions on emerging markets.


  • Emerging Markets’ Unsettling Tune (Francesco Guerrera, MoneyBeat, The Wall Street Journal) Quote from Marc Chandler, global head currency strategist at Brown Brothers Harriman:
"This is a long-term unwinding of capital flows which will take two or three years to complete."
"Ailing emerging markets are caught between a rock and a hard place - Washington and Beijing to be more precise."

Emerging markets have much more to fear from China than from the U.S. taper, according to Dolan. Quoting Crossborder Capital Managing Director Mike Howell, referring to a possible hard landing for China's rebalancing:

"Emerging markets should be much more concerned about the 'China taper' than the Fed taper."


  • Capital Controls or Cooperation? (Frances Coppola, Pieria) Frances Coppola has contributed to Global Economic Intersection. The free flow of capital, long considered the ideal of a free market global system, may no longer be an unquestioned "truth". Even the IMF has suggested that there may be times when capital controls are needed. What would help, according to the author, is the end of the U.S. "go it alone" monetary policy. Cooperation between central banks would be preferable to capital controls, according to Coppola.
  • It’s the hot money, stupid (Isabella Kaminska, FT Alphaville) The confusion of mistaking rent seeking "hot money" as legitimate foreign direct investment has instability. Kaminska doesn't see this as destabilizing unless the U.S. (who created all the liquidity) "attempts to woo" the hot money back home.
  • End of an Era (Doug Nolan, The Prudent Bear) Nolan disagrees with the accolades Ben Bernanke has been receiving:
Chairman Bernanke has been widely lauded for his "courage". Firemen entering burning buildings in search of trapped victims are brave. Our troops are courageous. I would see Bernanke and contemporary central bankers much more in terms of "daring." And it was the Bernanke doctrine of inflationism that basically provided open checkbooks to central bankers (and governments) around the globe. It's becoming a lot less thrilling now that the bills are starting to come due.
  • Is It 2007 Again? (5 Min. Forecast) Can an emerging market collapse take down the global economy?


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