EMERGING MARKETS: Emerging local currency debt the pure play as old money dwindles

Reinhart and Rogoff's study of 250 past financial crises over the last 800 years found public sector debt increases on average 86%, growth takes 4.4 years to recover and real estate six years.

Lead indicators this time are consistent with past patterns. However, the scale is bigger than anything since the 1930s, when unemployment in the US went from 3% to 25% in three years, and when it took 10 years for growth to recover. It is arguably only heterodox monetary policy (quantitative easing) that has prevented depression this time… so far. Developed-world central banks have prevented recession but are now spent forces. To do more would risk their credibility and government financing, and thus currency crises. They need to now pass the baton to the private sector. Maybe this gamb...