“Debt levels that quadrupled in a decade have made emerging markets vulnerable to tightening financial conditions in the era of rising U.S. interest rates, Fitch Ratings said.”
USAGOLD note: It is the equivalent of the individual who maxes out his or her credit cards then begins to suffer the effects of rising interest rates and payments. In the case of emerging countries income levels are likely to remain static or decline compounding the problem. Industrialized countries can be pulled into the emerging debt vortex via the contagion effect. In October, 1997 the U.S. stock market dropped 7.2% in a single day during the “Asian flu” debt crisis. In today’s terms that would equate to a drop in the DJIA of nearly 1800 points.