John Bull can stand many things,” wrote Walter Bagehot, “but he cannot stand 2 per cent.” The great Victorian journalist claimed that faced with such a low return on capital, his contemporaries would throw their money away on “impossible” investments. Such as lending to foreigners, for instance. A century and a half later, we are still chasing higher yields abroad. The great global carry trade, however, is getting rather long in the tooth.

The latest IMF Global Financial Stability Report comments that “emerging markets have benefited from capital inflows, but could low rates?.?.?.?result in too much of a good thing?” The answer, I believe, is yes. Capital inflows into countries with higher interest rates have put upward pressure on their currencies. Emerging market central banks have tried to prevent their currencies from appreciating by acquiring the incoming dollars. Their foreign exchange reserve holdings have increased by around $7tn over the last decade (with China accounting for roughly half of this).

This enormous accumulation of reserves, however, has been associated with a loosening of monetary conditions. Central banks have printed local currency to buy dollars. Not all of that liquidity has been soaked up. Real short-term rates across the emerging markets universe have hovered below 1 per cent for much of the past five years.