The emerging difficulties for emerging markets.

Since the subprime crisis vast sums of money have flowed into emerging markets because of excess liquidity in developed economies, wrote S Das. "The problem is that investors have piled into familiar carry trades, either directly or via funds. They've purchased high-yielding emerging-market securities and then, as returns have fallen, resorted to more adventurous strategies to boost income. Japanese retail investors, for example, are exposed to funds known as double-deckers, which purchase high-yield debt, then swap the income flows from the bond into a currency with high interest rates." Investors will lose heavily if the bonds default or if the currencies weaken. Many of these countries have lax reporting norms so risk calculation is difficult and, in the past, "Government intervention, such as the imposition of capital controls prevented redemptions and the repatriation of funds." Federal Reserve Chairman Jerome Powell said that the Fed will raise interest rates carefully to keep inflation under control. "The two risks faced by the Federal Open Market Committee are moving too fast and shortening the expansion, or moving too slowly and allowing for overheating and financial excesses, he said." On the other hand, President of St Louis Federal Reserve Bank James Bullard warned that even one further rate hike could set off a recession. "The thing is, we would be deliberately inverting the yield curve, because we think our models are right and we think the market's wrong." The US is the only economy that will grow this year as the rise in US interest rate and strengthening of the dollar, along with a trade war between the US and China will dampen global growth. "Once that pain in emerging markets gets particularly acute, that naturally will spread back to the US and change things in terms of how the Fed needs to manage domestic monetary policy," said M Nash. Pessimism about the global economy is shown in waning enthusiasm about further rises in the price of oil among oil investors. "When you start to look at the different economies across the globe -- Europe, Asia, the emerging markets are definitely starting to hit some headwinds," said M Watkins. Low oil prices is good news for India but slowing global growth is not. The price of oil will remain at $70 a barrel, as at present, because sanctions on Iran will provide support to prices. Last year, $80 billion of capital left Saudi Arabia and this year $65 billion, or 8.4% of GDP, will flow out, because of patchy reforms and brutal suppression of citizens. The expected IPO of Saudi Aramco has been canceled and advisers disbanded, because the company valuation was unrealistically high. The Saudi oil minister denied that the IPO has been canceled. Emerging markets will not emerge in the near future. Pity.