Israel Says It Seized Gaza-Bound Rocket Shipment From Iran

israel

JERUSALEM (Reuters) – The Israeli navy seized a ship in the Red Sea on Wednesday that was carrying dozens of advanced Iranian-supplied rockets made in Syria that were intended for Palestinian militants in the Gaza Strip, the military said.

It said the Panamanian-flagged cargo vessel Klos-C was boarded in international waters without resistance from its 17-strong crew, and would be escorted to the Israeli port of Eilat within days.

“It was a complex, covert operation,” military spokesman Lieutenant-Colonel Peter Lerner said of the seizure some 1,000 miles from Israel.

Dozens of M302 rockets were found aboard the Klos-C, a weapon which could have struck deep into Israel from Gaza and would have significantly enhanced the firepower of Palestinian militant groups such as Hamas.

“The M302 in its most advanced model can strike over 100 miles, and if they would have reached Gaza, ultimately that would have meant millions of Israelis under threat,” said Lerner.

Israeli television footage showed what appeared to be marines inspecting a rocket on the floor of a ship hold, with cement bags labeled “Made in Israel” in English next to it.

Lerner said the rockets were flown from Syria to Iran, from which they were shipped first to Iraq and then toward Sudan. Had they reached the African coast, they would have probably been smuggled overland through Egypt to Gaza, he said.

Iran had orchestrated the shipment, Lerner said, describing the process as months in the making.

The maritime tracking site marine traffic.com showed the last position of the Klos C as the Oman Gulf on February 22.

Lerner said the crew came from a number of different countries and there was no immediate indication that they knew the nature of their cargo.

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Israel’s Knesset debates proposal to enforce its sovereignty at Al-Aqsa Mosque – a move seen as ‘an extreme provocation to Muslims worldwide’

The plan to allow Jewish prayer at Islam’s third holiest site is threatening to plunge the entire region into great conflict

The Arab-Israeli conflict took on an increasingly religious hue when the Jordanian parliament voted unanimously to expel Israel’s ambassador in Amman after Israeli legislators held an unprecedented debate on Tuesday evening over a proposal to enforce Israeli sovereignty at one of Jerusalem’s holiest sites, currently administered by Jordan, and to allow Jewish prayer there.

The vote in Jordan’s 150-seat parliament is not binding on the cabinet, which is keen to maintain diplomatic ties with Israel. Still, the step was a measure of the degree to which the perception of an Israeli threat to Al-Aqsa Mosque, Islam’s third holiest site, is ratcheting up tensions in the wider Arab and Muslim worlds, not just among Palestinians.

Al-Aqsa is situated in an area revered as Judaism’s holiest site for housing the temples destroyed in 586BC and AD70 and is in the locale where religious Jews pray a third temple will be built. The Mount, known to Muslims as the Noble Sanctuary, has been an exclusively Muslim prayer site for the last 1,300 years, with the exception of the crusader incursions to the Holy Land.

The debate held in the Knesset, Israel’s parliament, was on “the loss of Israeli sovereignty over the Temple Mount” and was initiated by Moshe Feiglin, a Jewish fundamentalist member of Prime Minister Benjamin Netanyahu’s Likud party, who, along with other far-right members of the Knesset, is dismayed that the government continues to acquiesce in granting a type of autonomy to the Jordanian-backed Palestinian officials who run the shrine and also that police intervene to stop Jews who visit the Mount from praying there and prevent the unfurling of Israeli flags.

Mr Netanyahu received rare praise from some dovish Israelis after he intervened to prevent Mr Feiglin’s motion from coming to a vote. “This is the first time Netanyahu is taking on the pyromaniacs in his own party and he deserves credit,” said Daniel Seidemann, who heads the dovish NGO Terrestrial Jerusalem and is often critical of Mr Netanyahu. According to Israel’s 1994 peace treaty with Jordan, Amman has a “special“ role in Muslim and Christian sites in Jerusalem.

On Tuesday morning, violence erupted at the Mount in advance of the debate. The police spokesman Micky Rosenfeld said that about 100 Palestinians, most of them masked, began throwing stones and fireworks at police, lightly wounding two officers. Police then entered the mount to ”disperse the rioters“, he said.

Ziyad Surour, who works at a local clinic, told al-Quds daily newspaper that 22 Palestinians were injured by rubber-coated bullets and sound grenades.

But Mr Rosenfeld denied that rubber-coated bullets had been fired. Three Palestinians were arrested, he said.

Israeli police and border police officers scuffle with a Palestinian who is trying to enter Al-Aqsa (Reuters)Israeli police and border police officers scuffle with a Palestinian who is trying to enter Al-Aqsa

Hanan Ashrawi, the PLO spokeswoman, termed the holding of the Knesset debate an “extreme provocation to Muslims worldwide. Using religion as a pretext to impose sovereignty on historical places of worship threatens to plunge the entire region into great conflict and instability. It is reminiscent of the same regressive ideology that brought the crusades to Palestine in the Middle Ages’.’

Responding to the Jordanian parliament’s move, an Israeli official, who requested anonymity, said: ”There is no change in long-standing Israeli policy. The status quo at the Temple Mount will remain one that ensures free access to people of all faiths to the holy site.“ The official said Israel continues to stand by the 1994 peace treaty with Jordan and its provision of a special Jordanian role in Jerusalem holy sites.

Mr Feiglin told the Knesset during the debate that “every terror organisation can wave its flag on the Temple Mount, but the flag of Israel? Forget about it. [Reciting] a chapter of Psalms is reason for arrest. Even wearing a skullcap on the head is something the policemen recommend taking off. I call on the government of Israel to stop the discrimination and humiliation of Jews at the entrance to the Mount”.

Miri Regev, another far-right Likud legislator, said during the Knesset debate that Israel should establish separate prayer times for Jews and Muslims on the Mount as it did at the Cave of the Patriarchs site in Hebron, revered by Muslims as the Ibrahimi Mosque. ”We will reach a situation where the Temple Mount will be like the Cave of the Patriarchs, days for Jews and days for Muslims,“ she said.

Zahava Galon, head of the dovish Meretz party, said: ”No one disputes that Jews have the right to go up to the Temple Mount. At this time, there is a discussion of the diplomatic wisdom of this.

“He who stands here and calls for going up to the Temple Mount is making a provocation whose goal is to detonate Israel’s relations with the Muslim world, establish facts on the ground and hamper the diplomatic process.“

Tensions over the holy site have in the past led to sustained violence. In 2000, the then opposition leader Ariel Sharon’s provocative visit to the site triggered the outbreak of the second intifada uprising.

Mr Seidemann says he fears the strong emotions over the site could be used by those who want to disrupt the current peace diplomacy of US Secretary of State John Kerry. ”I’m very worried because the motivation of crazies – Jewish, Christian and Muslim – is always on the increase when there’s a political process going on,“ he said.

 

Hit Us With Sanctions? We’ll Seize West’s Assets, Russia Warns

A proposed law would allow Moscow to seize Western companies’ and individuals’ property and accounts in the event sanctions were imposed on Russia over the Ukraine crisis.

“[The bill] would offer the president and government opportunities to defend our sovereignty from threats,” state news agency RIA quoted Andrei Klishas, the bill’s author and head of the constitutional legislation committee in the upper house of parliament, as saying.

While lawyers were looking over the proposed law to see whether they were constitutional on Wednesday, “we have no doubts that it clearly corresponds to European standards,” Klishas added.

European leaders have threatened sanctions on Moscow if it does not reverse course in Ukraine.

Over the weekend, Russia took control of the Crimea, a strategic Black Sea peninsula that is part of Ukraine but which features a Russian-speaking majority.

A Standoff of Lawyers Veils Madoff’s Ties to JPMorgan Chase

Bernard L. Madoff at the federal courthouse in Manhattan on March 12, 2009, when he pleaded guilty to fraud.

It remains one of Wall Street’s most puzzling mysteries: What exactly did JPMorgan Chase bankers know about Bernard L. Madoff’s Ponzi scheme?

A newly obtained government document explains why — five years after Mr. Madoff’s arrest spotlighted his ties to JPMorgan and later led the bank to reach a $2 billion settlement with federal authorities — the picture is still so clouded.

The document, obtained through a Freedom of Information Act request, reveals a behind-the-scenes dispute that tested the limits of JPMorgan’s legal rights and raised alarming yet unsubstantiated accusations of perjury at the bank. More broadly, the document highlights the legal hurdles federal authorities can face when investigating a Wall Street giant.

That dispute, which positioned JPMorgan against the government and ultimately one government agency against another, traced to the point after Mr. Madoff’s arrest in December 2008. Around that time, JPMorgan’s lawyers interviewed dozens of bank employees who potentially crossed paths with Mr. Madoff’s company.

Federal regulators at the Office of the Comptroller of the Currency sought copies of the lawyers’ interview notes, the government document and other records show, hoping they would open a window into the bank’s actions. The issue gained urgency in 2012, according to the records, when the comptroller’s office conducted its own interviews with JPMorgan employees and discovered a “pattern of forgetfulness.”

Suspicious that the memory lapses were feigned, the regulators renewed their request for the interview notes held by JPMorgan’s lawyers.

But JPMorgan, which produced other materials and made witnesses available to the comptroller’s office, declined to share those notes. In its denial, the bank cited confidentiality requirements like the attorney-client privilege, a sacrosanct legal protection that essentially prevents an outsider from gaining access to private communications between a lawyer and a client.

Even after the comptroller’s office referred the issue to the Treasury Department’s inspector general, which sided with the regulator, the fight dragged on for months. Invoking a rare exception to attorney-client privilege, the inspector general argued that the lawyers’ interviews were essentially “made for the purpose of getting advice for the commission of a fraud or crime.”

In other words, if the accusations were true, JPMorgan employees either duped lawyers into covering up wrongdoing, or, worse, the lawyers themselves helped obstruct the investigation.

The accusation, the government document showed, led to a debate in Washington over how far to press JPMorgan when the bank was sure to fight and a judge would be free to set a harmful precedent for future cases.

Those concerns, and skepticism about the Treasury inspector general’s accusations, drove the Justice Department to reject the move to revoke attorney-client privilege. In the government document — a letter to the Treasury inspector general, or O.I.G., dated Sept. 12, 2013 — the civil division ruled that “unfortunately, O.I.G. has provided no basis — and we have not independently uncovered any basis — for suggesting that” the interview notes were “made for the purpose of facilitating a crime or a fraud.”

While the ruling applied to the Madoff case alone, it could have broader implications as regulators weigh the costs of future fights and the likelihood of passing muster with the Justice Department. And despite being an exceptional case — banks and their regulators typically settle disputes over attorney-client privilege without the Justice Department getting involved — the ruling illustrated a persistent tension over the privilege that continues to shape the government’s pursuit of financial fraud.

Even though the Justice Department is loath to undermine the privilege between a bank and its lawyers, a move that could prompt a reprimand from Congress and the courts, it also wants to appear tough on crime after the financial crisis. In the letter to the Treasury Department’s inspector general, the civil division’s leader declared that “I share your commitment to using all available tools to combat financial fraud,” noting that the division had sued Standard & Poor’s and Bank of America over their roles in the crisis.

And federal authorities worry that Wall Street might take the privilege too far — particularly in an era when banks facing a torrent of federal scrutiny are hiring dozens of law firms to conduct internal investigations alongside the government. As those investigations proceed, banks have invoked a number of protective firewalls, including attorney-client privilege and the work product doctrine, which shields interview notes and other documents that bank lawyers drafted in anticipation of litigation.

“Why hire a lawyer to do an internal investigation? It’s because you get the privileges,” said Bruce A. Green, a former federal prosecutor who is now a professor at Fordham Law School, where he directs the Louis Stein Center for Law and Ethics. “Otherwise, you’d save a little money and hire a consultant or accountant.”

In a statement, a spokesman for the Treasury Department’s inspector general said the office was “still considering if additional steps are warranted.”

The Justice Department’s civil division, which last year helped reach a record $13 billion settlement over JPMorgan’s sale of questionable mortgage securities, said in the Madoff letter that it stood “ready to work with you to develop an alternative that might better address the relevant regulatory concerns.”

JPMorgan, which served as the primary bank for Mr. Madoff’s company, declined to comment for this article.

In the past, a JPMorgan spokesman, Joe Evangelisti, has noted that the bank poured significant resources into bolstering its controls since Mr. Madoff’s arrest. He also remarked that “we do not believe that any JPMorgan Chase employee knowingly assisted Madoff’s Ponzi scheme,” which was an “unprecedented and widespread fraud that deceived thousands, including us, and caused many people to suffer substantial losses.”

The Madoff case is not the only one on Wall Street to raise questions about attorney-client privilege. Bank of America and Citigroup have had their own run-ins with authorities over whether to waive the privilege in a limited way during litigation, though those matters were resolved without the Justice Department intervening. And in an investigation into JPMorgan’s potential manipulation of energy markets, the Federal Energy Regulatory Commission challenged the bank’s assertion that attorney-client privilege protected certain emails.

Regulators also have pushed for access to handwritten interview notes and other findings that arose from an internal investigation conducted by a bank’s lawyers. While that push raises concerns about undermining the work product doctrine — and some bank lawyers have already reported a growing reluctance to be candid in private correspondence with bank employees — regulators say they are often unsatisfied with only a summary of the lawyers’ findings.

“We remind the banks that we’re your supervisor, you’re not our supervisor,” Thomas C. Baxter Jr., general counsel of the Federal Reserve Bank of New York, said at a recent panel discussion on attorney-client privilege held by Fordham Law School and the Cardozo School of Law.

Mr. Baxter added, however, that “we’re reasonable people.”

There are limits on what regulators can do if a bank balks at a demand for documents. If a fight ensues, the decision to challenge the privilege rests with the Justice Department.

In organized crime and terrorism cases, legal experts say, the Justice Department often exercises the so-called crime-fraud exception to the privilege. To do so, the Justice Department must show facts at the outset “to support a good faith belief by a reasonable person” that a judge’s review of the communications in question might establish that the crime-fraud exception would apply.

The JPMorgan case was not so clear cut. When the inspector general argued for the crime-fraud exception to invalidate the privilege, the Justice Department concluded that the evidence did “not suffice to justify” pursuing that claim.

In the letter outlining its decision, the Justice Department noted that memory lapses among JPMorgan employees “occurred in only a handful of the dozens of interviews conducted” by the comptroller’s office. The interviews, according to the letter, were conducted three-plus years after the events in question occurred. It is unclear why it took the comptroller’s office so long to interview bank employees.

The letter further says that the inspector general “has not identified any evidence affirmatively suggesting that the lapses in memory resulted from perjury,” adding that the “accusation of criminal collaboration depends entirely on speculation.” If the Justice Department were to pursue the subpoena, the letter said, the action would “risk developing negative precedent that could result in harm to the long-term institutional interests of the United States.”

Although the decision limited the view inside JPMorgan, the comptroller’s office and federal prosecutors in Manhattan still penalized the bank for its failure to sound the alarms about Mr. Madoff. The settlements, announced in January, amounted to roughly $2 billion.

BITCOIN CRASHES

Bitcoin prices fell from a high of $1,240 to a low of $870 this morning. This is according to data from Bitcoin exchange Mt. Gox.

That $370 drop can by characterized as a 30% crash.

bitcoin

Earlier today, the People’s Bank of China warned that the controversial electronic currency carried risk. It also instructed financial institutions not to trade it.

“Is this a bubble in Bitcoin?” asked former Federal Reserve Chairman Alan Greenspan on Bloomberg on Wednesday. “Yeah it’s a bubble.”

“This is worse than the tulip mania,” said Nout Wellink, former president of the Dutch Central Bank. “At least then you got a tulip [at the end], now you get nothing.”

Here’s a look at the chart from Clark Moody.

Read more: http://www.businessinsider.com/bitcoin-falls-after-china-warning-2013-12#ixzz2mbGl1jVY

How ExxonMobil Corp. Could Be Affected by Russia’s Move Into Ukraine

Rex W. Tillerson

The world is obviously waiting raptly for an indication of the next occurrence in the chaos gripping Ukraine. Even with Russia potentially backing down in what has become something of a geopolitical circus, more than a few investors may not have considered that one company in articular, ExxonMobil (NYSE: XOM),  could be affected severely by an increasingly contentious relationship between Russia and its now topsy-turvy onetime satellite.

You know, of course, that nearly three years ago Exxon and Russia’s giant state-controlled oil company Rosneft OAO carved out a deal to work together exploring the potentially prolific Russian Arctic. Also included were plans for the two companies to engage in joint operations in the Western Siberia shale and the Black Sea.

Big money for a huge deal
The original deal was to include an initial expenditure of $3.2 billion just to explore the Kara Sea in the frigid Arctic. Also part of the agreement was the granting of rights to Rosneft for stakes in a portion of ExxonMobil’s U.S. shale plays. And in a separate agreement, the Russian company received a 25% interest in Exxon’s Point Thomson Project, a natural gas venture in Alaska.

It won’t surprise you to know that Russian authorities have a history of not playing fairly with others. Exxon has for years overseen the Sakhalin-1 project on the country’s island of the same name. The desolate 500-mile swath of land is located in the Sea of Okhotsk, east of the country.

Royal Dutch Shell (NYSE: RDS-B) was once the operator of Sakhalin-2, a similar effort on the island. But after spending $20 billion of its own money, the company was forced to sell half its interest in the project to Gazprom, the massive state gas company, for a bargain-basement price.

Hardly a lingering love affair
Beyond that, Exxon’s relationship with Russia’s leaders has hardly been consistently amicable. In the spring of 2007, The Wall Street Journal reported in a lead article that the company’s relationship with the Russian government was becoming progressively more contentious. During his company’s annual meeting the same year, ExxonMobil CEO Rex Tillerson stated openly that the big Texas-based company would require more clarity about how the Russian government would treat foreign companies before Exxon would undertake more projects there.

But Exxon isn’t the only major integrated oil company that could be affected by increased contretemps between Russia on the one hand and Europe and the U.S. on the other. Last year, after participating for a decade in TNK-BP, a challenging 50-50 joint venture with a group of Russian oligarchs, BP and the Russians both sold their interests in the venture to Rosneft for a $55 billion total. BP came away with $16.65 billion in cash and a nearly 20% interest in Rosneft. I wouldn’t be at all surprised, however, were BP eventually to be squeezed out of its stake for a thin sliver of its actual value.

Threatening Big Oil’s Ukraine plans
There also is a group of western companies preparing to begin exploratory drilling in Ukraine, an effort being undertaken with an eye toward reducing the country’s dependence on Russian gas. Those plans obviously would be threatened by a Russian takeover of its neighbor.

For instance, Shell’s docket for the year includes the drilling of 15 appraisal wells in eastern Ukraine’s Yuzivska field. That effort is slated to cost a not-inconsequential $10 billion. And Chevron (NYSE: CVX) , the second-largest U.S. oil company, is prepared to spend about $400 million to begin operations in Ukraine’s Oleska shale formation.

Even Exxon was ready to ink an agreement for drilling in the Skifska area of Ukraine’s portion of the Black Sea. That now-tabled effort was to have involved a pair of offshore wells to be drilled at a total cost of about $735 million.

Foolish takeaway
There’s lots more that could be said about the possible impact of an expanded Russian incursion into Ukraine. Clearly, such a movement would also have a substantial bearing on global crude (and perhaps natural gas) prices. But for now I urge Fools in general — and especially those with a taste for energy — to keep a close eye on the progression of events in both Ukraine and Russia.

The energy landscape is changing radically. Oil exports from America continue to rise as our country gains energy independence. And there is one company front and center that is poised to make its investors rich. Warren Buffett has already committed to it, and you can too. Click here to learn about this company in the Motley Fool’s special report:  OPEC’s Worst Nightmare.

The ‘Hidden Debts’ Of Russia And Ukraine That Could Make Them More Exposed Than Any Other Country In The World

In recent years, corporations in emerging markets (EM) have increasingly sought to tap international bond markets to finance themselves, as low interest rates at the global level have provided more attractive terms of borrowing than those corporations could access in their home countries.

Onshore and offshore debtChart 1: Onshore and offshore debt. Note: Series represent cumulative sum of bonds issued that have not yet matured or been called, which may not properly account for debt restructuring. 

Jens Nordvig, global head of currency strategy at Nomura, estimates that EM corporates have issued $400 billion of offshore debt since 2010 — about 40% of total issuance (chart 1).

This issuance is not captured in traditional country-level balance of payments statistics, which only measure debt issuance on a residency basis and not a nationality basis.

In other words, the official statistics only measure a given corporation’s debt issuance in the home country, and don’t take into account offshore debt issued through overseas subsidiaries.

The latter measure is a better gauge of risk exposures, according to Philip Turner, deputy head of the monetary and economics department at the Bank for International Settlements, who argues in a new working paper that “the consolidated balance sheet of an international firm best measures its vulnerabilities.”

This “hidden debt,” as Nordvig puts it, could pose a major risk for EMs in which currencies are rapidly declining against the dollar.

Guess which two EM countries have issued the most offshore debt as a percentage of GDP?

Hard currency external debtChart 2: Hard currency external debt in emerging markets as a percentage of GDP. Note: Offshore issuance is the total of bonds issued by subsidiaries incorporated in a country different from the firm’s primary location of business. Figures are based on amount outstanding, which will account for debt restructuring. Sample excludes Singapore and Hungary which have outsized cross-border loan exposure. 

Number one is Russia, at 12% of GDP. Number two is Ukraine, at 9% (chart 2).

In a recent IMF working paper, economists Kyuil Chung, Jong-Eun Lee, Elena Loukoianova, Hail Park, and Hyun Song Shin explained the danger posed to EM corporates by a rise in global interest rates, like the one we’ve seen over the last year (emphasis added):

The practice of offshore issuance of debt securities by overseas subsidiaries of EM firms means that the standard external debt measures that are compiled on a residence basis may not fully reflect the true underlying vulnerabilities that are relevant for explaining behavior. If the overseas subsidiary of a company from an EM country has taken on U.S. dollar debt, but the company is holding domestic currency financial assets at its headquarters, then the company as a whole faces a currency mismatch and will be affected by currency movements between the funding currency and the domestic currency, even if no currency mismatch is captured in the official net external debt statistics.

Nevertheless, the firm’s fortunes (and hence its actions) will be sensitive to currency movements and thus foreign exchange risk. In effect, the firm will be taking on a carry trade position, holding cash in local currency but with dollar liabilities in their overseas subsidiary. One motive for taking on such a carry trade position may be to hedge export receivables. Alternatively, the carry trade position may be motivated by the prospect of financial gain if the domestic currency is expected to strengthen against the dollar. In practice, however, the distinction between hedging and speculation may be difficult to draw.

The recent escalation of military tensions in between Ukraine and Russia have caused the currencies of both countries to dive against the dollar. Firms in these countries with large proportions of external debt issued in dollars are now facing an increase in the value of their debts relative to the value of their assets, increasing somewhat the risk of default.

In short, when the dollar strengthens, dollar liquidity decreases, and credit risk goes up.

“The U.S. dollar global liquidity measure occupies a special place, and we may attribute its special status to the role of the U.S. dollar as the currency that underpins global capital markets through its role as the pre-eminent funding currency for borrowers,” write the economists in the IMF paper.

This could become a major problem for local banking systems in emerging markets, as Turner explains in the BIS paper (emphasis his):

Issuance by EM non-bank corporations on such a scale, and a possible “stop” at some point in the future, could affect the domestic banking systems in EMEs through at least three channels:

i. The first arises because EM corporations have typically borrowed from local banks. When extremely easy external financing conditions allow such firms to borrow cheaply from abroad, local banks have to look for other customers – so that domestic lending conditions facing most local borrowers actually ease more than the expansion in total domestic bank credit aggregates suggest. A tightening in external financing conditions would reverse this … small firms might then find it harder to get finance even if total domestic bank credit continues to rise.

ii. A second channel works through wholesale funding markets for banks. When EM corporations are awash with cash thanks to easy external financing conditions, they will increase their wholesale deposits with local banks.7 This is also reversible. Such deposits are flighty – and a worsening of external financing conditions can therefore make it more difficult for domestic banks to fund themselves at home.

There is extensive evidence, drawn from many different contexts, that the deposits of non-financial corporations are indeed more procyclical than other bank deposits.8 Because changes in global non-financial deposits predict growth and trade, Shin (2013) argues that they deserve special attention in the construction of global monetary or liquidity aggregates.

iii. The third link is through the hedging of their forex or maturity exposures, often via derivative contracts with local banks. Even if the local banks hedge their forex exposures with banks overseas, they still face the risk that local corporations will not be able to meet their side of the contract. The upshot is that the domestic bank that thinks it has managed its risks, will find itself, if its corporate clients fail, with unhedged exposures vis-à-vis foreign banks.

As a result of these linkages, the central bank may face greater instability in its domestic interbank market whenever large corporations find it harder to finance themselves abroad. This can arise even if domestic macroeconomic conditions have not changed. The central bank that enjoys credibility could of course use local monetary policy to offset such destabilising forces. It could use its policy rate to resist any incipient rise in local money market rates; and it could relax its liquidity policies. But if corporate exposures are very large, the central bank may find itself contemplating measures of a scale or nature that might undermine its credibility.

These are all things that are important for investors in emerging markets to keep in mind going forward. If the U.S. economy continues to improve, U.S./global interest rates continue to rise, and the dollar continues to strengthen, a lot of this “hidden debt” could quickly become just the opposite.

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