TDB Late Stage Capitalism Report: The US recession has started – a cascading third world debt crises will follow

Bloomberg reports that the US recession has started. Dubbed a “technical frecession|” because it meets the usual definition of economic decline for two quarters. But this recession is guaranteed to deepen after the 75 point hike in interest rates in the US last week. There is nothing “technical” about it.
The drumbeat of recession grew louder after the US economy shrank for a second straight quarter, as decades-high inflation undercut consumer spending and Federal Reserve interest-rate hikes stymied businesses and housing.

Gross domestic product fell at a 0.9% annualized rate after a 1.6% decline in the first three months of the year, the Commerce Department’s preliminary estimate showed Thursday. Personal consumption, the biggest part of the economy, rose at a 1% pace, a deceleration from the prior period.

The inevitable consequence of the US hiking rates is that the US dollar gets stronger as money flows into the US to access the higher rates.As a consequence, nearly all currencies have fallen in value against the dollar. This means that the country’s debt burden is automatically increased because debts are almost always in dollars.
So-called “emerging markets” or “low-income countries” –  that is poor countries in the Global South are in for a cascading crisis.
The Atlantic Council notes:
A perfect storm of economic forces threatens to swamp developing countries with inflation, rising interest rates, and unsustainable debt.

The portents of disaster were on display during the recent turmoil in Sri Lanka, where epic government mismanagement sent the country into a thirty-five-billion-dollar debt default amid severe food-and-fuel shortages. While Sri Lanka waits for China, Japan, and commercial lenders—which together represent two-thirds of the country’s debt—to restructure its loans, markets worry that other low- and middle-income countries soon won’t be able to meet their obligations either.

As a result, countries and companies are watching their bills soar, especially for those whose debts are affected by changes in interest rates. The International Monetary Fund (IMF) estimates that 30 percent of emerging market countries and 60 percent of low-income countries already are in or nearing debt distress.
Bloomberg concurs in an article headed: “Historic Cascade of Defaults Is Coming for Emerging Markets”.
A quarter-trillion dollar pile of distressed debt is threatening to drag the developing world into a historic cascade of defaults.

Sri Lanka was the first nation to stop paying its foreign bondholders this year, burdened by unwieldy food and fuel costs that stoked protests and political chaos. Russia followed in June after getting caught in a web of sanctions.
Now, focus is turning to El Salvador, Ghana, Egypt, Tunisia and Pakistan — nations that Bloomberg Economics sees as vulnerable to default. As the cost to insure emerging-market debt from non-payment surges to the highest since Russia invaded Ukraine, concern is also coming from the likes of World Bank Chief Economist Carmen Reinhart and long-term emerging market debt specialists such as former Elliott Management portfolio manager Jay Newman.
At stake, then, is $237 billion due to foreign bondholders in notes that are trading in distress. That adds up to almost a fifth — or about 17% — of the $1.4 trillion emerging-market sovereigns have outstanding in external debt denominated in dollars, euros or yen, according to data compiled by Bloomberg.

And as crises have shown over and over again in recent decades, the financial collapse of one government can create a domino effect — known as contagion in market parlance — as skittish traders yank money out of countries with similar economic problems and, in so doing, accelerate their crash. The worst of those crises was the Latin American debt debacle of the 1980s. The current moment, emerging-market watchers say, bears a certain resemblance. Like then, the Federal Reserve is suddenly ratcheting up interest rates at a rapid-fire clip in a bid to curb inflation, sparking a surge in the value of the dollar that is making it difficult for developing nations to service their foreign bonds.


  1. Yep. And Grunter pissed our big spend against the wall in corporate subsidies and zombie companies as well as pet woke projects. His and Beetroot’s economic mismanagement will become a stark picture in the next 12 months.

    There is no way Te Reo and Beltway Willis will know what to do either. These 2 are not used to differentiating between wants and needs. All the while Mahutacorp has led the country down the route towards civil war by enacting a radical interpretation of the treaty.

    The citizenry of New Zimbabwe better strap themselves in.

    • and who is going to start this civil war? angry whiteys with guns? Tama Iti? please tell us more of the plot to the dystopian sci fi novel you are writing.

      • What happens if National/Act get in and start discussing removing Maori seats and dismantling co-governance models. Do you really believe Maori radicals will just sit there and do nothing. Likewise when seperate legal and prison systems are implemented by Labour/Greens/Maori the extremists on the other side are just going to drive their tractors up Queen Street?

        • Maori are not going to start a civil war. i don’t know what maori are saying on your local marae, but i will guess that “lets have a civil war” isn’t a topic of conversation. as to your assumption that all maori will go “all in” if DS gets his wet dream fantasies come true, is bull shit. most maori will protest legally. a few will be violent fuckwits.

          and as for your low opinion of Pakeha toting guns and shooting Maori, over TPM policies that will never pass legislation unless over 50% of the vote in parliament is pure fantasy.

          get a grip, sometimes you say stuff that’ll make me think, “you know what, he’s got a point”, but most of the time its just bull shit like this. pointless, irrelevant, shit stirring, fuckwittery, of such blatent disregard for truth over point scoring, makes you a pathetic, hollow waste of space.

          Mahutacorp, thats a nice little racist dig. i imagine like all tough little bigots, you hide in your basement, too scared to leave and blame it all on everyone else rather than your own cowardice.

          congrats, you win dickhead of the week.

      • standalone, panzerboi doesn’t really think that but the idea of it gets him all tingly in the trouser department

    • Neoconservative rhetoric gaslighting exercise using the ‘race card’ for political point scoring nothing to see here folks. Do you actually believe that all NZ pakeha are going to use their overwhelming numbers to attack Maori with violence? Your oversimplifying the issues and have little understanding and knowledge of what the TOW means to NZ in trade, constitutional frameworks, and legal findings in court proceeding that has shaped our legal system today remembering that Maori lost everything except their will to live when this International document was signed between the Crown of England & Maori in 1840. The European settlers didn’t want a bar of the Treaty of Waitangi when arriving on these shores & hence history repeating itself today from their descendance’s. Nothing new to see folks just history repeating itself.

    • If you included the NZ debt to GDP ratio you might have some evidence to support your opinion however the actual information shows that NZ is in a sound financial position (relative to the distressed nations in the article) so while we are in for a bumpy ride Martyn’s warnings regarding climate should worry you more. There are already instances where people can’t afford insurance because the premiums have increased because of risk & the increase in major events will soon be making insurance companies bankrupt, super funds, banks & industry will follow.

  2. “corporate subsidies and pet woke projects”

    Unfortunately, that’s about right, Frank. There’s always plenty of dough for pet woke projects.

  3. A recession is a good thing to realign the economy and clean out the crap.

    What you REALLY need to be concerned about are the coming food riots.
    It’s already started in Sri Lanka and the Netherlands with the banning of fertiliser use. That idiot Trudeau is doing the same in Canada and the equivalent of him here is heading in the same direction. Meanwhile production from Ukraine will be greatly reduced.
    This adds up to a large chunk of global cereal production missing.

    Governments will fall. People will starve. Watch this space!

  4. I think that concern about the plight of those wanting to be insured is fraught!
    …New claims data released today by the Insurance Council of New Zealand Te Kāhui Inihua o Aotearoa (ICNZ) shows total insurance payments back to communities for extreme weather events closing in on $200 million for the year to the end of June. Last year set a new annual record for such payments at $324 million…

    “Insurance only transfers risk, it doesn’t reduce it. Communities need to act now through local and central government to build reliance to local risks be that flooding, sea level rise, drought or wildfires. Investment is needed in natural and man-made measurers in order to keep risks at a level where insurance is affordable for both homeowners and insurers alike over the medium to long term,” added Tim. ( ICNZ Chief Executive, Tim Grafton.)

    “Thankfully, some communities have been spared even worse damage due to some flood defences performing reasonably well, albeit near their limits. However, they will have to ask themselves if that will continue to be the case as the current trend of intensifying extreme events continues.”

  5. Well Robo still has something left in his Bazzooka.

    Maybe they can start a Housing Construction program!! FFS!

    • Not much has changed?

      Someone Else’s Country looks critically at the radical economic changes implemented by the 1984 Labour Government — where privatisation of state assets was part of a wider agenda that sought to remake New Zealand as a model free-market state. The trickle-down ‘Rogernomics’ rhetoric warned of no gain without pain, and here the theory is counterpointed by the social effects (redundant workers, Post Office closures).


Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.