In the summer of 1997, an economic and currency crisis rocked the Asian markets. One by one, Southeast Asian countries such as Thailand, Indonesia, Korea and Japan saw their economies crash in the wake of heavy foreign investment. An economic boom had made the region an attractive investment opportunity for much of the 1990s. By 1997, however, domestic production and development had stalled, and foreign investors grew nervous. A divestment run on the Thai baht triggered the crash. Large corporations, extremely dependent upon the confidence of foreign investors failed to meet debt obligations and began to fail throughout Southeast Asia. Currencies throughout the region faltered and nosedived from their mid-1990s positions of stability. The causes of the Asian economic crisis are varied. Lax oversight of corporations had ramifications in economic downturns that were not a concern in the mid-90s boom. Macroeconomic policies of the southeast Asian countries made their economies vulnerable to the uncertain confidence of their foreign investors. Despite this, Corsetti, Pesenti and Roubini (1998) make the point that, ?market overreaction and herding caused the plunge of exchange rates, asset prices and economic activity to be more severe than warranted by the initial weak economic conditions.? Much of the crisis that began in 1997 has roots that go back further to the area?s economic growth that started in the early 1990s.
Although many economists consider the Asian economic collapse to have begun in Thailand, conditions throughout the region meant that other countries? economies were destabilized to the extent that they quickly followed Thailand.
Throughout the early 1990s, growth in Southeast Asia attracted much foreign capital. However, by 1995 and 1996, Thailand?s current account deficit had grown (from 5.7% in ?93 to 8.5% in ?96 [Pesenti et al., 1998]). When domestic production slowed, this account imbalance represented an even greater percentage, when compared to GDP. Much of the instability in Thailand?s economy was brought about by heavy short-term borrowing that required stringent debt maintenance. A boom in real estate and the Thai stock market attracted foreign speculation that could not be sustained in the face of investor doubts. The Thai government attempted to shore up shaky investor confidence by officially backing the financial in...
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...r 1997 are from the Economist Intelligence Unit Country Report, 2nd quarter 1998.
Table 2. Non-Performing Loans (as proportion of total lending in 1996)
Korea 8%
Thailand 13%
Indonesia 13%
Hong Kong 3%
Malaysia 10%
China 14%
Philippines 14%
Taiwan 4%
Singapore 4%
Source: 1997 BIS Annual Report; Jardine Fleming.
Table 3. Debt Service plus Short-Term Debt, World Bank Data (% of foreign reserves ).
1990 1991 1992 1993 1994 1995 1996
Korea 127.4 125.9 110.4 105.7 84.9 204.9 243.3
Indonesia 282.9 278.8 292.0 284.8 278.0 309.2 294.2
Malaysia 64.0 45.9 45.6 42.4 48.7 55.9 69.3
Philippines 867.6 257.0 217.1 212.6 172.0 166.6 137.1
Thailand 102.4 99.3 101.3 120.3 126.6 138.1 122.6
Hong Kong 30.5 26.9 22.8 20.6 22.0 16.8
China 55.3 43.7 108.6 113.7 54.1 49.6 38.5
Taiwan 23.9 22.3 23.1 25.2 23.7 24.2
For example, Ann Putnam wants healthy children and envies Rebecca Nurse for all the healthy children she bore. She accuses Nurse of killing most of her offspring using witchcraft. In fact, the official warrant for Rebecca Nurse’s arrest is issued “[f]or the marvelous and supernatural murder of Goody Putnam 's babies”(67). Ann Putnam does not care if one of Salem’s most devout families is torn apart so long as its members suffer for their happiness. In addition, Thomas Putnam’s desire for more land causes him to make his daughter accuse an innocent man of witchcraft since “[t]he day [she] cried out on Jacobs, [Putnam] said she’d given him a fair gift of land”(89). His greed for land surpasses his care for the other residents of the town. Both Ann and Thomas Putnam are willing to destroy other families for their own benefit, and they succeed because the townspeople’s fear of witchcraft clouds their common sense that the accusers may have ulterior
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The inflation rate of Thailand was the lowest during 1998. From 1997 to 1998, to solve the Asian financi...
After the Second World War, Japan experienced an amazing and thriving economy. The United States’ Marshall Plan helped rebuild the Japanese economy and “created an opportunity for Japan to export manufactured products to the increasingly affluent United States” (Colombo). Japan, which was at the time comprised of “zaibatsu,” or financial conglomerates, began competing globally by mastering Western goods, and “selling them back to the West for cheaper prices” (Colombo). By the 1970s and 1980s, Japan had become the global leader in revolutionary electronics, which created an international trend “similar to the Apple iPod and iPhone craze of recent years” (Colombo). During this post World War Two period, “Japan experienced attractive economic growth to place itself as an economic powerhouse” (Tolia). Eventually, this economic miracle would come to an end and create a miserably failing economy for the Japanese. What had happened was that the seemingly perfect economy had secretly been “bubble-forming.” At the end of the flourishing period, the bubble collapsed and caused an economic catastrophe in the housing market, stock market, and financial market in general. In this essay, I will analyze some major causes of the bubble’s formation, and its demise. I will also analyze the Japanese government’s attempt to recover from the catastrophe. Overall, The Plaza Accord, Japan’s economic law, and its corporate structure led to the formation of the bubble, while the government’s attempt of financial deregulation halted the nation from recovery after the bubble’s collapse.
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