In the 1990s, emerging market governments were vulnerable because they had made a habit of borrowing abroad; when the inflow of dollars dried up, they were pushed to the brink. Since then they have been careful to borrow mainly in domestic markets, while building up lots of dollarreserves. But all their caution was undone by the private sector’s obliviousness to risk.
Tuesday, October 28, 2008
It's not just hedge markets that are in trouble now. Emerging markets like Russia, Korea and Brazil are in trouble Paul Krugman tries to explain what went wrong:
Posted by Jotman on Tuesday, October 28, 2008