(Washington)

Investors, be worried about the Fed, and not for the reasons you think. While all the market’s focus has been on how quickly the Fed will raise rates, what could really cause problems is the Fed’s unwinding of its balance sheet. According to the Indian central bank, this unwinding is sucking Dollars out of the system and causing a Dollar liquidity squeeze. According to Urjit Patel, the governor of India’s central bank, this Dollar-squeeze means “a crisis in the rest of the dollar bond markets is inevitable”, with a growing “possibility . . . a ‘sudden stop’ for the global economic recovery”.

FINSUM: It sounds like emerging markets are going to have increasing trouble issuing Dollar bonds, which could definitely throw a wrench into the recovery. Maybe this is how the Fed sparks a global recession and not just an American one.