“Zero rates and quantitative easing were the cause of dollar liquidity flooding these countries. It was the biggest reason why net capitals flows into emerging markets doubled from $4 trillion to $8 trillion after 2008, much of it wasted in a late cycle blow-off. One cannot blame the US for the failings of these countries, yet Ben Bernanke and his successor will still have to live with the consequences. Globalisation has entrapped the Fed. Like it or not, the Fed is the world’s monetary superpower. The exodus of money from emerging markets that we have seen so far is nothing compared with what could happen if this episode is mishandled.”
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