They're right not to trust loan sharks.

I think this capital flight from America is the main reason why we didn't see huge price inflation after all the QE and interest rate repressive monetary expansion after 2008. We exported the inflation to the third world, since it offered a higher rate of return, and since elite investors had learned that the Fed and the Treasury would basically insure them against all bad outcomes, it was a no brainer for them.

Now that the credit cycle is maturing and the dollar is once again rising in value as it contracts in scope, the emerging markets, which have taken on vast sums of dollar denominated debt, are in danger of a mass default, which would probably trigger the global financial collapse we all know is coming sooner or later.

The concept that low rates and monetary expansion will drive up inflation within the political jurisdiction operated on the assumption that the capital region was relatively closed. 40 years ago, this was true. If the Fed increased the supply of US Dollars, the local inflation rate would follow suit. However, with technology allowing for rapid capital movement across borders, central banks no longer have control over where the newly printed money goes. With rates, thus returns, so low in the US, any attempt by the Fed to goose inflation with the printing press will fail because people borrow in Dollars at low rates then buy higher rate instruments in other nations. The rates are so low that it wipes out any risk cost of investing in underdeveloped regions.

The failure in the existing mainstream economics playbook is that it utterly ignores geographical effects. As such, because of the rise of the Internet and computerization, a nation with low rates of interest can now expect low inflation because the currency is seeking higher rate returns elsewhere.

If the Fed really wanted to drive up inflation, they could accomplish that by raising interest rates. All that new money would decide that the US is now a better place to park that cash because returns are now higher.

Kenya not at risk of debt distress - IMF



Praying hard for KE not to listen to these goons!