The Volatility Machine: Emerging Economics and the Threat of Their Financial Collapse

With a geographic focus on Latin America and Asia, the author uses the Mexican peso crisis of 1994 and the subsequent Asian crisis three years later to illustrate the importance of recognizing the immense volatility involved for investors and borrowers when dealing with emerging markets. Over time, borrowers and investors have underestimated the impact of such instability while actually allowing ruling sovereigns to establish capital structures in their economic environment that contribute to it. The "volatility machine," therefore, is the country's established capital structure that is vulnerable to influence imposed by its ruling entity. Chapters cover the current financial crisis, a liquidity model describing the international lending process, the history of international lending, and how capital frameworks are built.