Rising commodity prices helps the commodities exporting countries and hurts the importers. These are normal parts of economic cycles. However, when these cycles are manipulated by central banks, both sides of the trade could feel the pain

While equity markets in many countries are at all-time highs, other asset classes are at multi-year lows. The Bloomberg Commodities index tracks 22 different commodities. It tracks everything from nickel to sugar and even lean hogs. It recently closed at 116.67, its lowest since July 2009 at the depths of the recession. Oil has also tanked. The US price for oil (WTI) had declined to $75.58 a barrel on Friday.

It is not only commodities that are tanking. Currencies around the world are rapidly declining against the US dollar. The US dollar index is the highest it has been since 2010. It has risen substantially against the euro. The yen, thanks to the Bank of Japan, has also fallen to new lows. But, the developed countries currencies are in relatively good shape compared to the emerging markets. The rouble has plunged 23% in the past three months. The Ghanaian cedi is down 26% against the US dollar this year. The Nigerian naira is at an all-time low down 9% since January along with the better performing Kenyan schilling, which is only at a three year low. Not surprisingly, the worst performing currency is the Ukrainian hryvnia.

What does all this mean? Well from the US perspective, it sounds pretty good. The strength of the dollar is theoretically due to the expectations for a stronger US economy and higher interest rates. Non-commodity businesses are expected to do better from the fall of inputs especially oil. The US consumer will save an estimated $62 billion, which retailers are hoping they will splurge during the upcoming Christmas season. It also keeps inflation under control, at least in certain countries. This would allow certain central bankers to continue printing money.

However, there are many other perspectives. Many of the emerging markets have commodities-based economies. If the price of crude remains at $80, the members of the Organization of Petroleum Exporting Countries (OPEC) would lose $150 billion annually. At $80 a barrel, Venezuela, Iran, Russia and even Saudi Arabia will not be able to balance their budgets. Venezuela is even in an odd position for a country with some of the largest reserves on earth. They are having difficulty refinancing their debt, much of which they owe to China as well as Wall Street.

Falling oil prices may be partially due to too much supply. However, the fall of all commodities means that demand has dried up. Demand has dried up because the world economy is slowing. This is another indication that the major destination for many of these commodities, China, may be having more problems than have been previously suspected.

The problems of Venezuela are not isolated. The printing of money by developed countries central banks has sent money all over the world in the search for yield. Some investors bought higher yielding debt in local currencies. There are estimates that it could be about $2 trillion of foreign capital has been invested in emerging market local currency debt.

Other investors bought debt denominated in dollars. During Asian currency crisis, 80% of the developing countries sovereign debt was in dollars. Today the level is only 46%. Far lower, but it still dangerous when combined with burgeoning dollar private debt issued by corporations in emerging markets, many for the first time, has exploded. If this debt is not hedged, and much of it is not, then we could be seeing defaults. Strapped corporations will be trapped by a strong US dollar and slowing commodities economies. Finally, there is the liquidity issue, which I dealt with in an earlier piece.

When the value of currencies and commodities change in value, there are always winners and losers. A rising currency can mean less inflation and cheaper imports. A falling currency could mean more inflation, but better exports. Rising commodity prices helps the commodities exporting countries and hurts the importers. These are normal parts of economic cycles. However, when these cycles are manipulated by central banks, both sides of the trade could feel the pain.

(William Gamble is president of Emerging Market Strategies. An international lawyer and economist, he developed his theories beginning with his first-hand experience and business dealings in the Russia starting in 1993. Mr Gamble holds two graduate law degrees. He was educated at Institute D'Etudes Politique, Trinity College, University of Miami School of Law, and University of Virginia Darden Graduate School of Business Administration. He was a member of the bar in three states, over four different federal courts and speaks four languages.)