by John Rubino
Pretend for a minute that it’s 2019 and you’re Brazil. Or maybe Turkey, your choice.
You’ve got a lot of infrastructure to build if you want to keep your people happy, and to fund those projects you’ll need to borrow a lot of money.
That’s not a problem, because borrowing is easy. The whole world wants to give you US dollars at interest rates that are shockingly low compared to what prevails in your domestic financial markets. And, icing on the cake, your experts tell you that the dollar is likely to fall versus your country’s currency, making it even easier to pay off those loans. So you load up, borrowing as much as the market will bear and use the proceeds to buy higher-yielding local bonds (thus earning a nice spread) while starting on those roads and bridges. It feels like a win-win with minimal risk.