Brewing Emerging Market Debt Crises

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DXY Annual Change Signals Crises Unfolding

As the Federal Reserve, who holds sole control over the monetary policy of the world reserve currency, continues to tighten monetary policy of the U.S. dollar, the global economy has begun to break as a result, being hit with a strong dollar and soaring commodity prices in tandem.

Bloomberg, there is nearly a quarter trillion dollars worth of emerging market debt that is trading in distress accounting for approximately 17% of all emerging market debt denominated in dollars, euros or yen.

As bitcoin/cryptocurrency natives know all too well in recent months, the default of one counterparty is only isolated in theory, and in practice the second/third order effects are seemingly impossible to know beforehand.

In regards to El Salvador’s bitcoin adoption, the nation has only purchased $38 million worth of bitcoin, and given citizens the option to use either BTC or USD as a tax-free legal tender, which is a pittance compared to the $800 million worth of dollar debt owed on its bonds in 2025.

The key thing to understand is that in a debt-based monetary system, a debt crisis is essentially a short squeeze. Specifically in regards to the dollar, despite the gigantic amount of stimulus supplied throughout 2020 into 2021, a structural shortage of dollars exists due to the construction of the international monetary order.

March 7 issue,

“It would be wise to warn our readers that despite being extremely bullish on bitcoin’s prospects over the long term, the current macroeconomic outlooks looks extremely weak. Any excessive leverage present in your portfolio should be evaluated.

“Bitcoin in your cold storage is perfectly safe while mark-to-market leverage is not. For willing and patient accumulators of bitcoin, the current and potential future price action should be viewed as a massive opportunity.

“If a liquidity crisis is to play out, indiscriminate selling of bitcoin will occur (along with every other asset) in a rush to dollars. What is occurring during this time is essentially a short squeeze of dollars.

“The response will be a deflationary cascade across financial markets and global recession if this is to unfold.”

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