Article Review #4

This article was a nice change of pace compared to the previous more difficult Stockman articles. In the International Monetary Fund's annual meetings in Peru, global leaders talk about the economy of several countries, focusing on specifically issues and vulnerabilities. Emerging economics are now facing the risk of financial crises of their own. All financial crises share very similar symptoms: unwinding of asset-price booms, rising leverage, growing current-account and fiscal deficits, significant slowdown in economic growth and exports, and a reduction or outright reversal in capital inflows. The emerging economics are currently showing all of these symptoms. Most importantly, they are showing the biggest one yet, hidden debts. Hidden debts are extremely difficult to detect and measure until it's too late and inevitably lead to a crisis. They do not appear on balance sheets or standard databases, and they morph from one crisis to another. It wasn't until crises happened in countries that the IMF and financial markets found out about the countries' hidden debts, much larger than what it was assumed to be. The author questions about economies and where hidden debts are hidden in them. Reinhart talks about China and how they lend money to other countries, which still owe them money, but to what amount is unknown due to the hidden debts. They could be lower than estimated or much higher, if the data does not include everything. The author's opinion is that emerging economies' debts seem largely moderate, but it is likely that they are being underestimated, and by a large margin. If the economies are actually experiencing a large amount of hidden debt than is believed, it can be big enough to trigger a crisis. I give this article a difficulty rating of 2/3 and I think it was the easiest article to read because of its length and easy vocabulary.