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The shock is already before our eyes as Turkey, India, and South Africa hit the brakes, forced to defend their currencies as global liquidity drains away.

The World Bank warns that withdrawal of stimulus by the U.S. Federal Reserve could throw a “curved ball” at the international system. “If market reactions to tapering are precipitous, developing countries could see flows decline by as much as 80% for several months,” it said. They may need capital controls to navigate the storm.

People will start asking themselves which country is next

William Browder from Hermitage says that is exactly where the crisis is leading, and it will be sobering for investors to learn that their money is locked up – already the case in Cyprus, and starting in Egypt. The chain-reaction becomes self-fulfilling. “People will start asking themselves which country is next,” he said.

Roughly US$4-trillion (pounds 2.4-trillion) of foreign funds swept into emerging markets after the Lehman crisis, mostly by then “momentum money” late to the party.

The IMF says US$470-billion is directly linked to money printing by the Fed. “We don’t know how much of this is going to come out again, or how quickly,” said an IMF official.

One country after another is now having to tighten into weakness. The longer this goes on, the greater the risk that it will morph into a global deflationary shock.

Turkey’s central bank took drastic steps on Tuesday night to halt capital flight, doubling its repurchase rate from 4.5% to 10%. This will bring the economy to a standstill in short order. South Africa raised rates yesterday by half a point to defend the rand, and India acted the day before, all forced to grit their teeth as growth fizzles. Brazil and Indonesia have been tightening for months to stem a currency slide.