by Karl Spain
No, they’re not a Rock’n Roll group.
No, they’re not the last top five Obama officials to resign.
But they are the big economies in the world, most likely to have major problems in the coming year if — U.S. and/or world interest rates move up. I can’t take credit for the name; Morgan Stanley coined it last year in a report describing these countries, their economies and the threat posed to them by higher interest rates.
Here’s a quote:
“These countries are most vulnerable to a withdrawal of the foreign investment needed to finance their shortfall in capital coming in versus capital going out. South Africa, Indonesia, India and Brazil are the other four.”
Turkey was the fifth country.
No one knows what’s going on with the CA account in Turkey, but it’s mysteriously jumping up and down by Billions every month, the “errors and omissions” category is larger than all the others (some months!) and the account seems to empty in proximation to when the Lira appreciates.
Which honestly makes no sense at all. But this is Turkey we’re talking about and Erdogan may have put his son in charge (just cleared of massive corruption charges by a parliamentary vote Erdogan controlled) of the investment flow accounts responsible for the CA account balance –and who knows, maybe he and/or his son have an Italian girlfriend(s)?
These are all Current Accounts (CA) balancing issues, which are too complex to explain here, but basically, all these countries are vulnerable to a cash crisis.
I’d like to add a country of my own to that list — which didn’t appear to have a CA problem last year — but I think will have one in 2015 or 2016, Russia.
I add Russia to that list, because compounding the problems of the “Fragile Five” in a way that the Morgan Stanley report never anticipated is the oil price crash of 2014, which is further pressuring all of these countries, but most particularly Russia, Brazil and Indonesia, because of their heavy reliance on oil export money to fund domestic government budgets.
I know what you’re thinking, why couldn’t it have been a new band?