We start to feel the effects of Fed tightening

Not yet in the USA, but across the developing world, the rise in US interest rates is starting to have a serious negative effect:

Argentina has hiked interest rates to 60% as it takes dramatic steps to restore confidence in its plunging currency,in the latest sign of turmoil among emerging market economies this year.

The Argentine central bank raised the cost of borrowing by 15 percentage points on Thursday in an attempt to shore up the peso, which has plummeted in value. The central bank said it would keep rates unchanged at 60% until at least December.

The peso dropped amid intense trading on foreign exchanges, falling by more than 10%, despite the bank’s rate move, in the most severe drop for the currency since it was floated in 2015. $1 (77p) is now worth about more than 39 pesos, having been worth about 18 pesos at the start of the year.

Paul Greer of the City fund manager Fidelity said countries across emerging markets were being targeted by investors due to their economic problems, including high levels of debt and imports. “There are no easy answers for Argentina to its current woes,” he said.

Elsewhere on Thursday, the Turkish lira fell by more than 4% against the dollar amid increasing concerns over economic crises in developing nations. So far this year the Indian rupee and the South African rand have also come under pressure as concerns grow that the countries will struggle to pay their dollar-denominated debts following a rise in US interest rates. The rand fell a further 3% against the dollar on Thursday.

[Read more here]

Look at the plunge in the Argentinian Peso (note a rise shows more and more national units needed to buy 1 US$, which is to say means a fall in the value of the national currency)  Chart thanks to the people at Trading Economics:



source: tradingeconomics.com

And look at the Turkish Lira:


source: tradingeconomics.com

Note: I think the charts update live, so I'm not sure exactly what picture you will see when you read this post. Prolly worse than the images I'm posting now.  

This is the stuff of deep recessions.  And we're already seeing slowdowns elsewhere, as I talk about here.

I should be able to post or to link to a piece on the US recession in 2019/20 shortly.  But all the evidence from around the world is that growth is slowing and that vulnerable economies are heading into recession already.