Can the FED phase out QE without causing financial and economic instability in both the US and its trading partners

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Gregory Marks's picture
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Hi Gregory,

Congratulations on your trip to AIC!

I went over this particular topic a few weeks back, and reached the same conclusion-that there will definitely be some financial turmoil across EM in light of QE taper. In addition to what you've talked about, could you draw a brief comparison between different EM countries, talking about which ones are the most vulnerable and what are the metrics that could be used for such comparisons? It is interesting to note that Indian Rupee has shown surprising resilience this year, in spite of the taper, whereas Peso and Lira have crashed.

Prabhat, thank you. As for your question on EM turmoil, it is clear that all nations are likely to be impacted on some level or another. The degree of vulnerability is subject to a host of different factors that include, but are not limited to:
1. investment sectors (i.e. those with heavy reliance on commodities are likely to be impacted more than those without)
2. liquidity of the respective market
3. risks of uncertain political shifts on declining growth prospects (e.x. Turkey, Thailand)

These would be my top three simplistic, fundamental structures of vulnerability- though underlying issues are much deeper for EM as a whole over the next 36 months in my opinion.

As for the Rupee and the Reserve Bank of India, search for 'Gregory Marks Indian Rupee' in Google for my articles. Here is the latest: http://www.dailyfx.com/forex/fundamental/article/weekly_spotlight/2014/0...

I'm bullish on India on a longer term basis and their relatively low reliance on Chinese trade makes them better prepared for any further storms from the mainland, but near term risks cannot be dismissed. The fumes of confidence can fade easily and there are too many near term risk factors to finally call this the turning point. Mid-late Q2 may prove difficult. Twitter: gm_fx