The Causes of the Asian Crisis
The Causes of the Asian Crisis. There are many speculations about the
causes of the Asian Crisis. From my research I found out that there is quite a
number of reasons for the Asian currency crisis. There is a book called; The
East Asian Miracle, which was published by the World Bank. This book
expressed the relationship between government, the private sector, and the
market. (See Hoover Digest 1998 No.3. William McGurn. What went
wrong?) The book talks about the economic bloom in Southeast Asia. The
East Asian countries borrowed a lot of money from the IMF and World
Bank and used it to create a better economy for themselves. I found out that
the following countries due to their reoccurrence during my research
experienced the bloom. The countries are as listed: South Korea, Indonesia,
Hong Kong, Thailand, Malaysia, The Philippines, Singapore and Taiwan.
These countries experienced a lot of growth, growth that even doubled the
growth in the rest of East Asia, and almost tripled the growth in Latin
America. The economic miracle started in South Korea, Hong Kong, Taiwan
and Singapore then Malaysia, Thailand, Indonesia and the Philippines. These
...
... middle of paper ...
...orea's was slipping. It seemed that
the larger the current account deficit was the harder it was for the IMF to find
a solution. Another was that each country asked for help at different times
from the IMF. Thailand called when most of its usable reserves were done
and Korea called when it was almost drowning in the problem. These were
the likely causes of the Asian financial crisis I found out from my research.
Some say that the IMF is responsible for the problems but from this analysis
of the address from Stanley Fischer, a representative of the IMF, they do not
think that they are responsible.
They had an idea to make as much money as they could and buy a little
Marconi (2010) believes that the role played by the institutional investors propagated the financial crises. Institutional investors, which is both, individual or companies do enjoy the benefits of reduced commission preferential regulations. This is due to their large and professional investments. Institutional investors like the mutual funds, pension funds, hedge funds like Magnetar Capital, and Life insurance companies like the AIG and investments trusts contributed to the global financial crises of 2007-2008. This financial crisis also referred to as the great recession was triggered by liquidity problems in the United States economy. Many large financial institutions collapsed according to Geczy (2010). The government had to bail out some banks and this resulted in a decrease in the stock and money funds investments in the United States and spread on all across the globe.
The financial crisis occurred in 2008, where the world economy experienced the most dangerous crisis ever since the Great Depression of the 1930s. It started in 2007 when the home prices in the U.S. Dropped significantly, spreading very quickly, initially to the financial sector of the U.S. and subsequently to the financial markets in other countries.
This essay will examine the causes of the 2008 Global Financial Crisis (GFC) from a Marxist perspective. This paper will specifically examine and critique how Marx’s Theory of Crisis can be applied to understand and interpret the underlying structural causes of the 2008 Global Financial Crisis.
The subordination of Southeast Asia’s economy to the capitalist structure of the western world through colonialism greatly increased its significance in the global economy and saw the transformation of a subsistent to commercial economy. However, the exceptionally rapid and at times reckless expansion of economic growth also has its disadvantage which was to expose Southeast Asia to the vulnerability of experiencing fluctuations of the international market (Tarling(ed)(1992: 192). This became evident during the Great depression.
According to the traditional view, the main causes for debt crisis was divided into two main parts:
As many people know, Imperialism has shaped the culture and customs all over the world. Imperialism is the dominance of one country over another politically, economically or socially. Western culture can be seen in all parts of the world; from Asia to Africa, to the Indies and the Americans. The downside of having the bits of western culture all over the world, is how it got there. Western influence was forced upon places in Asia, specifically India, Indonesia with a hellacious price; lives and poverty.
An asset bubble burst in Japan during the late 1980 till early 1990. Many problems were still affecting the Japanese today. It all starts with asset price skyrocket in Japan. During the 1980, stock price, and many others assets double it prices and some even tripled in just less than five years. The whole economy did not rise with the asset price and it causes many problems. In the early 1990 asset price deflate and many companies were affected. Companies were those largely affected by the burst of the asset bubble and individuals were less affected, but the fall of asset price cause a chain reaction turn down in Japan’s economy.
To properly consider the impact of integrating with the global economy on China, Japan, India and Southeast Asia, it is useful to first define the global economy. When did it come into being? Frank (1998) posits that a global economy had existed since the start of the thirteenth century. Although financial flows were limited, there was a burgeoning exchange of commodities between Asian and European economies. Of the Asian economies, China and India stood out for the extensiveness of their trade links and magnitude of their trade volumes. Both countries traded with Southeast Asia, the Islamic world, the Mediterranean and European countries. In addition, China traded with the Middle East and North Africa.
Underwood, Peter(1998), Korea¡¯s Current Economic Crisis, Industrial Research & Consulting, Affiliate of Fry Consultants Atlanta, (http://www.fryconsultants.com/new.html)
The causes of the crisis are various. In 1927, the Wall Street financiers started to buy shares on the stock market, followed by people pushed to invest their capital on the stock exchange. There were people who committed all they had, encouraged by consultants that were either not honest nor capable. The voice on the street thought, suggested that this unexpected growth was going to end very soon.
IMF Staff Position Note. (2009, March 6). The Case for Global Fiscal Stimulus. Retrieved from http://www.imf.org/external/pubs/ft/spn/2009/spn0903.pdf
The 1997 Asian financial crisis was a disaster that obsessed much of Southeast Asian countries. The financial crisis began in July 1997, and rose to worldwide economic meltdown due to financial contagion. Thailand, Indonesia and South Korea were the most affected by the financial crisis. Hong Kong, Malaysia, and the Philippines also had abundant negative effects by the financial disaster. China, Singapore, and Vietnam were less affected, however, they also suffered from the crisis, which leads the citizens lost their faith of the economy at that period.
East Asia has already become the most dynamic region in the world during the last decade. The United States has been suffering from the 2008 financial crisis created by its own mismanaged financial sector, and only recently did the Federal Reserve decide to start slowing down the quantitative easing, demonstrating a slightly positive economic prospective. The Europe, which has already fully integrated itself and with the United States economically, collapsed right after the financial crisis not only because of its vast amount of investment in the US security market, but also because of its sovereign debt crisis in some of its member states. However, countries in East Asia remained robust and served as the growth engine of the world in the last few years. One of the major problems that East Asia is facing today is the lack of regionalism that resembles the NAFTA and the European Union. Nevertheless, the Cold War, the Asian financial crisis, and 9/11 terrorist attack have been very influential factors that stimulate the regionalism of East Asia.
Many researchers have pointed out that the global imbalances are the root of the recent financial crisis. Portes claims that “the underlying problem in international finance over the past decade has been global imbalances, not greed, poor incentive structures, or weak financial regulation, however egregious and important these may be.” (2). According to him, the global imbalances lead to “the increasing in dispersion of current account”, which “puts a burden on financial systems to intermediate.”