Shutdown: How Covid Shook the World's Economy

by Adam Tooze

If 2020 started with foreign funds hemorrhaging out of the emerging markets, the year ended with a record inflow. In late November, weeks after Peru floated its century bond, Côte d’Ivoire issued a twelve-year EUR1 billion Eurobond. Despite offering a record-low yield of 5 percent, it was five times oversubscribed. In 2021, rating agency Fitch predicted that Namibia, Nigeria, and South Africa would roll over old debt. Côte d’Ivoire, Ghana, and Kenya might embark on new issues. Benin, 158 in 2019 out of 189 on the Human Development Index, was on the list of those expected to return to the market.84 The countries in question urgently needed the money and were willing to pay, but what was pushing money out even to the most impoverished corners of the world economy was the huge abundance of dollar liquidity. It was the stance of the U.S. Federal Reserve that gave the global credit system the extraordinary elasticity it exhibited in the face of the coronavirus crisis. The abundance of dollars underwrote the market-based system of global credit and deferred the kind of crisis that might force a general reckoning. Only a tightening of U.S. monetary policy would expose the real constraints on low-income borrowers.