The Fragile Five

Whilst tapering the cheap cash injections and an end to the Fed's economic stimulus could begin to spell a return to normality for the US economy, it could have serious ramifications for five large emerging economies in particular.

Dubbed "The Fragile Five" by Morgan Stanley, these are the countries judged to be most at risk when tapering finally begins. The group includes Indonesia, South Africa, Brazil, Turkey and India.

What do they all have in common? Well, they all have large current account deficits - the broadest measure of the trade gap - which means that they rely on external financing.

So, these countries have relied on money flowing into their borders, and now that investment may leave when the end of the era of cheap cash looms. I have written about this Great Reversal of cash before.

Plus, foreign investors are worried about political risk because all five have elections set for next year. That raises uncertainty.

Perhaps one reassuring thought is that there has been some time for these economies to prepare for the inevitable end of cheap cash. Unlike prior crises where the money left quickly there is no "sudden stop" of cash this time. After all it's been five years since the financial crisis and the Fed can't inject money into the economy forever.

As for the end of this era of cheap cash, it may be next month, December or perhaps January when Fed chairman Ben Bernanke leaves office.

The key question is whether there has been enough time for the rest of the world to prepare their economies for the inevitable.