IMF: Emerging-Market Troubles Risk Triggering Asset Fire Sales - Essay Example

"IMF: Emerging-Market Troubles Risk Triggering Asset Fire Sales" is an article by Ian Talley that expounds on the financial instability and how the U.S’ raising of its policy rates could contribute more to global financial instability. In writing this article, Talley applies Monetary Policy and the Federal Reserve, one of the macroeconomic concepts. This is evidenced by how he expounds on money supply that comprises of money held in the banks and loans. Talley also explains how Fed is likely to affect the economy through raising its policies.

According to the article, the raising of policy rates by the U.S. will not only stall the U.S. recovery but also catalyze debt problems that take place in the emerging markets. It also asserts that most of the investors are pulling their cash out of developing economies in a time that growth prospects are dimming, commodity prices falling, and borrowing costs rising. According to the article, the retreat of investors is as a result of re-awakening of the financial crisis. The retreat of investors leads to excessive borrowing that pose a great challenge to the banking sector.

The excessive borrowings not only affect growth prospects but also make banks raise borrowing costs in addition to replenishing their capital cushions. All these fuels capital flight. The main point that the author addresses in this article as summarized above is that the U.S through Fed can awake currency war that will fuel global financial instability. This article is very important in learning about inflation and its adverse effects. From the article, one can learn that countries such as the U.S. overcome inflation through raising interest rates as well as reducing money supply in an economy.

ReferenceTalley, I. (2015). IMF: Emerging-Market Troubles Risk Triggering Asset Fire Sales. Wall Street Journal. Retrieved from: www.wsj.com