The Asian Financial Crisis

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The Asian Financial Crisis

In the 1980s and for most of the 1990s, the entire Asian marketplace was seen as nothing less than a miracle. Business was booming, and economies in the region enjoyed GDP growth rates nearing 10% per year—4 to 5 times the growth rate of the US economy at the time. It began in the ‘80s when foreign investment in Asian countries began to increase. Foreign investors lured by stable governments, the promise of high returns, and currencies that were tightly pegged to the US dollar began throwing money into the ASEAN-5 (Indonesia, Malaysia, the Philippines, Singapore, and Thailand). Excitement in foreign investment like this can greatly help those foreign economies and therefore help the world economy. However, the extent and speed at which money was invested in these countries in the 1980s was far greater than anyone could have imagined. The already growing countries grew even more with the investment being supplied by outsiders. Until the crisis, Asia had attracted almost 50% of the total capital investment in developing nations in the world—almost $100 billion in 1996 alone. This foreign money financed power plants, skyscrapers, airports, and a quickly growing export economy. Workers’ wages rose and an entire middle class appeared with a taste for finer—usually imported—things. The per-capita income levels in Hong Kong and Singapore exceeded those of some industrial countries for a while. Moreover, for the 30 years leading up to the eventual fall of the Asian markets, personal income levels had risen fourfold in Malaysia, fivefold in Thailand, and an astonishing tenfold in Korea. This swelling of the Asian markets was felt all over the world as other countries’ exports to Asia rose in response. The U...

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