Asia
Between 1997 and 1998 the currencies of Indonesia, Thailand, and South Korea lost over a third of their value, while the currencies of the rest of Asia lost over one-fifth their value. This economic downturn was fueled by many variables. Pinpointing those variables may be impossible. There are however many theories as to which entities lent hands in the collapse of the Asian economies and their currencies. The fundamental issue in Asia was a liquidity problem, not a solvency problem. The debt was concentrated in short-term liabilities while reserve assets were low. Though there is evidence of weak banking systems, this was not the primary cause of the currency crisis. This problem was deeply rooted in the financial policies that have been overlooked. This paper will examine the Asian currency crisis, the extent to which the IMF may have actually worsened the problem, the explanatory power of an Under-Consumption Theory, and the effect of the crisis on the Asian environment.Finance and Liquidity leading to Crisis During the 1990's, East Asia attracted large inflows of foreign capital, most of which were short term (Weber, 2001). These inflows were encouraged largely by weak European and Japanese economie
5 percent would be off because of the same IMF projections the economies failed to reach in 1995. This is evident in Thailand where about 755,000 housing units were built in Bangkok between 1992 and 1996, when only an estimated 382,240 were needed (Leightner, 2000). These monies were invested mainly in property and equity. Bosworth (1998) states that flows of portfolio capital by 1996 exceeded $30 billion a year. Leightner (2000) continues to argue that saving for the future is possible for individuals but not for the whole community. The main point in his argument is that all income is derived from final demand. Poverty has significantly increased, health and education have decreased, divorce and suicide rates have increased, the number of infants abandoned or put into orphanages has increased, and drug-related criminal activity has increased (Webber, 2001). According to Bosworth (1998) the errors of bad economic policy could be easily overlooked because the Asian countries all had relatively strong fiscal positions. The financial crisis has significantly altered Asia's environmental conditions as well as the underlying forces driving environmental change in the region (Dauvergne, 2000). The financial economy may recover, but the real economy may not. The banks started calling in their loans to build up cash reserves so they would not be closed. The problem is that such a crisis could have been avoided, but now it has had serious complications and damaging effects on the people and the environment in the region. With such damage, the economy is weaken and vulnerable to even more threats. Since the crisis there has been a rise in illegal mining, logging, and fishing.
Common topics in this essay:
Asia Poverty,
According Weber,
According Bosworth,
Housing Bank,
South Korea,
Under-Consumption Theory,
Thailand Korea,
Asia Sachs,
East Asian,
Alan Greenspan's,
webber 2001,
currency crisis,
under-consumption theory,
sachs 1998,
bosworth 1998,
leightner 2000,
banking systems,
2001 argues,
domestic demand,
webber 2001 argues,
current account deficits,
weak banking systems,
faster domestic demand,
weak banking,
asian currency crisis,
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Acceptance Essays
