When its economy sours, however, a government can restructure the debt or devalue the currency, and a business can simply go bankrupt and default on the loans. It doesn't happen quite that quickly, of course. It takes time for the economic turmoil to bubble up into a default. When the local currency is devalued, it makes it more expensive for the business to buy supplies to make its products, which means that they must raise prices to sell the products profitably. Because the products are more expensive, consumers buy fewer of them, which sends sales and corporate profits plummeting.
Investors try to sell the stock, but no one wants to buy it so they have to sell at a loss.
Borrowers with dollar-denominated loans suddenly realize it will take more rubles to pay off the loans. These are the reasons that emerging market investments are considered so risky, and why they can mean big payoffs or big losses for investors. Chicago halfback Jay Berwanger was college football's first Heisman Trophy winner in 1935.