by John Rubino
Back in the simpler days of 2019, there was this (now completely forgotten) impending crisis in which emerging market countries’ dollar-denominated debt was going to blow up their – and by extension the rest of the world’s – economies.
The short version of the story is that China, Brazil and some other up-and-comers decided to lower their interest costs by borrowing US dollars at, say, 3%, rather than borrowing in their own bond markets at much higher rates. They’d save money in the short run and profit further in the long run when their economies grew and their currencies rose against the dollar, making it easier to pay off their loans. Based on these rosy assumptions, EM governments and corporations accumulated about $5.5 trillion of dollar-denominated debt.