The case cited in the article above may be the only time the Treasury has failed to pay interest and principal on its debt. But there are many other ways to default on debt than nonpayment. Countries can slap on capital controls so investors can’t convert to hard currency or get their money out
Two of the articles above focus on a potential emerging-markets debt crisis. This would be the third emerging-markets debt crisis in 35 years. The first in this sequence was 1982–85 and was centered in Latin America. The second was 1997–98 and was centered in South Asia and Russia. (This sequence omits the Mexican Tequila Crisis
In 2011–13, the Obama administration waged an effective war on Iran using financial weapons alone without firing a shot. Iran was denied access to the global dollar payments system (Fedwire and the Clearing House Association) and later denied access to the global payments system for all major currencies (SWIFT). The result was a collapse of
Using the Fed’s broad real trade-weighted dollar index (my favorite FX metric, much better than DXY), the dollar hit an all-time high in March 1985 (128.4) and hit an all-time low in July 2011 (80.3). Right now, the index is 95.2, slightly below the middle of the 35-year range. But what matters most to trading
Emerging-markets, EM, debt crises arrive every 15 or 20 years almost like clockwork. The first crisis in recent decades began in 1982, reached a crescendo in 1985 and was not resolved until late 1989. That crisis involved mostly Latin American borrowers such as Argentina, Brazil and Chile (the so-called “ABC” debtors) and Mexico. It was
