'Circle of Pain' Snags Emerging Markets, Too Krugman: Russia et al. not immune after all to crisis' vicious cycle By Jason Farago Posted Oct 27, 2008 12:41 PM CDT Copied A trading session at Moscow Interbank Currency Exchange, MICEX, on Thursday, Oct. 23, 2008. The Moscow stock market has taken a hammering and was recently suspended. (AP Photo/Alexander Zemlianichenko) Only a few weeks ago, it seemed the main fronts of the financial crisis were the Western banking system and mortgage market. But now the crisis has spread to emerging markets like Russia and Brazil. As Paul Krugman writes in the New York Times, the mantra of “decoupling”—that emerging economies could operate independent of the West—turns out to be a fiction. In Russia, for example, the government was amassing a stable portfolio of foreign exchange—but risk-oblivious corporations and banks ran up huge debts denominated in dollars or euros. Now the bills are due, institutions worldwide are failing, and the turmoil in the global system only makes things worse. “Bad news begets bad news,” Krugman says, “and the circle of pain just keeps getting wider.” Read These Next Beyonce leaves national anthem unfinished. Musk says his new party is in business. See the best BBQ cities in the US. A space capsule carrying ashes of 160 people crashed in the ocean. Report an error