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Rate threat

In Washington the US Federal Reserve is preparing to raise interest rates, even though this would destabilise already fragile economies across the world. The new Global Financial Stability Report from the International Monetary Fund (IMF) warns: “Emerging markets must prepare for the adverse domestic stability implications of global financial tightening…emerging markets should prepare for an increase in corporate failures…”

After the 2008 crash, £385 billion was invested in the “major emerging market economies”, which have accounted for 80 per cent of global growth in the past five years, half of that coming from China alone. But in the past 18 months speculators have taken £195 billion out of these countries.

Firms in these economies used the current glut of cheap money to borrow far too much. Chinese firms led the way, assisted by Indian, Turkish, Brazilian, Mexican and Chilean firms. The firms’ debts rose from £2.6 trillion in 2004 to over £12 trillion in 2014 and their average debt grew from 48 per cent of GDP to 74 per cent. Rapid debt growth preceded previous emerging market financial crises.

• A longer version of this article is on the website as Here comes another crash