East Asian financial crisis are an evidence of fact that economies are prone to fianacial pressures in spite of a stable sustainable growth rate. The East Asian economic crisis is the most important economic event in the region of the past few decades. That much is agreed. Beyond this, there is yet no unanimity about its root causes nor about the solutions. The differences of views are being debated in academic and policy circles and reflected in the media. One thing though is certain: the earlier optimistic expectation that it would last only some months has proved wrong. Instead the financial crisis has been transformed into a full-blown recession or depression.
Moreover the threat of depreciation has spread from a few countries to many in the region, and is spreading to other areas such as Russia, South Africa, and possibly Eastern Europe and South America.
The objective f this term paper is to analyze the
• factors behind the east asian crisis
• Background
• Finacial liberalization
• Policy implication.
Back ground of Crisis.
The great debate on causes is whether the blame should be allocated to domestic policies and practices or to the intrinsic and volatile nature of the global financial system.
In the first phase of the crisis, as it spread from Thailand to Malaysia, Indonesia, the Philippines, then to South Korea, the international establishment (represented by the IMF) and the G7 countries placed the blame squarely on domestic ills in the East Asian countries.
They cited the ill judgment of the banks and financial institutions, the over-speculation in real estate and the share market, the collusion between governments and businesses, the bad policy of having fixed exchange rates (to the dollar) and the rather high current account deficits.
They studiously avoided blaming the financial markets, or currency speculation, and the behavior of huge institutional investors.
Although the cited weaknesses certainly existed, the view that these in themselves caused the crisis was difficult to sustain. For it implied that the "economic fundamentals" in East Asia were fatally flawed, yet only a few months or even weeks before the crisis erupted, the countries had been praised as models of sound fundamentals to be followed by othe...
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...ternal debt was only revealed after the crisis had broken out. It was later found that The debt levels had climbed rapidly to dizzying heights: about US$150 billion for South Korea and Indonesia, and about US$100 billion for Thailand.
Most of the debt (especially for Korea and Thailand) was contracted by the private sector. In particular, the build-up of short-term debts was becoming alarming.
What transformed this debt build-up into a major crisis for Thailand, Indonesia and South Korea was the sharp and sudden depreciation of their currencies, coupled with the reduction of their foreign reserves in anti-speculation attempts.
When the currencies depreciated, the burden of debt servicing rose correspondingly in terms of the local-currency amount required for loan repayment. That much of the loans were short-term was an additional problem.
Foreign reserves also fell in attempts to ward off speculative attacks. The short-term foreign funds started pulling out sharply, causing reserves to fall further. When reserves fell to dangerously low levels, or to levels that could not enable the meeting of foreign debt obligations, Thailand, Indonesia and South Korea had to seek IMF help.
report of the national commission on the causes of the financial and economic crisis in
“From the beginning, Japanese observers referred to the dramatic series of events from September 1931 onwards as the Manchurian 'incident' (jihen), a term apparently denoting an undeclared war..” Many historians agree with this statement and others think it was not so much an undeclared war but it was a major turning point for military usage in japan. Some believe that it was the start to the road to pearl harbor. Historian takehiko Yoshihashi believed that the Manchurian crisis was responsible for bringing the army's influence into japanese politics.
Shahrokhi, M. (2011). The global financial crises of 2007-2010 and the future of capitalism. Global Finance Journal, 22, 193-210. doi: 10.1016/j.gfj.2011.10.010.
In the present day, the world's economy is ever-changing and adjusting. Many different reasons control the reasons for this. The future of currency is something that can only be predicted and is not guaranteed. However, there are many determing factors behind the changes that can take place. Asia and North America are two continents that have economies that have recently changed or are in the midst of change.
Stewart Gordon is an expert historian who specializes in Asian history. He is a Senior Research Scholar at the Center for South Asian Studies at the University of Michigan and has authored three different books on Asia. Gordon’s When Asia Was The World uses the narratives of several different men to explore The Golden Age of medieval Asia. The fact that this book is based on the travels and experiences of the everyday lives of real people gives the reader a feeling of actually experiencing the history. Gordon’s work reveals to the reader that while the Europeans were trapped in the dark ages, Asia was prosperous, bursting with culture, and widely connected by trade. This book serves to teach readers about the varieties of cultures, social practices, and religions that sprang from and spread out from ancient Asia itself and shows just how far Asia was ahead of the rest of the world
Public debt, which comes from securities and bonds issued by the United States Treasury, is responsible for over 60 percent of the debt (“Debt Position and Activity Report” 1). These debts are being held by the public inside and outside the US. Over 25 percent of the debts are held by foreign governments, in which China and Japan accounts for almost half of the sum (“Treasury Bulletin: September 2009” 60).
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.
(Murphy, 2008) The US banking sector was first hit with a crisis amongst liquidity and declining world stock markets as well. The subprime mortgage crisis was characterized by a decrease within the housing market due to excessive individuals and corporate debt along with risky lending and borrowing practices. Over time, the market apparently began displaying more weaknesses as the global financial system was being affected. With this being said, this brings into question who is actually to blame for this financial fiasco.
Historically, financial crises have been followed by a wave of governments defaulting on their debt obligations. The global economic history has experienced sovereign debt crisis such as in Latin America during the 80s, in Russia at the end of the 90s and in Argentina in the beginning of the 00s. The European debt crisis is the most significant of its kind that the economic world was seen started from 2010. Financial crises tend to lead to, or exacerbate, sharp economic downturns, low government revenues, widening government deficits, and high levels of debt, pushing many governments into default. Greece is currently facing such a sovereign debt crisis and Europe’s most indebted country despite its surplus in the early 2000s. Greece accumulated high levels of debt during the decade before the crisis, when the capital markets were highly liquid. As the crisis has unfolded, and capital markets have become more illiquid, Greece may no longer be able to roll over its maturing debt obligations. Investment by both the private and the public sectors has ground to a halt. Public sector debt has increased substantially as the state had to rely on official assistance to payroll expenses, fiscal deficit and fund social payments.
The Latin American Debt crisis did not occur over night, the crisis was many years in the making and signs of its arrival were prominent in Latin American society. The reasons for its occurrence are also expansive; some fault can also be place in countries outside of Latin America. The growth rate in the real domestic product of many Latin American countries grew at a constantly high rate in the decade prior to the crisis in the 1980s, this growth led to an increase in foreign investment, corporate investment, and the world began supporting these developing nations (Ocampo). The foreign investments into Latin America created a new international financial system that gave the foreign banks access the funds to give massive loans to the developing nations of Latin America. However, the affluence was not continuous. A rise in natural resources occurred in the mid-1970s, which led to increase the prices of imported goods, and thus Latin American countries would have to find a way to pay back these deficits, which then led them to borrowing more money. By the end of the 1970s, Latin America was in debt to for over $150 billion, and the growth rates for each nations debt varied greatly with Mexico and Brazil taking on more than half of the debt themselves.
Many of the “Elite” financial figures could not give a definite answer about why this crisis occurred as well as stated by many of the people interviewed, “We don’t know how it happened.” Many young brokers working for JP Morgan back in the middle of the 90’s believed they could come up with a way to cut risk, credit derivatives. Credit Derivatives are just a way of using other methods to separate and transfer risk to someone else other than the vender and free up capital. They tested their experiment with Exxon Mobile who were facing millions of dollars in damage for the Valdez Oil Spill back in 1989 by extending their line of credit. This also gave birth to credit default swaps (CDS) which a company wants to borrow money from someone who will buy their bond and pay the buyer back with interest over time. Once the JP Morgan and Exxon Mobile credit default swap happened, others followed in their path and the CDS began booming throughout the 90’s. The issue was that many banks in...
...price and devaluation of the domestic currency to bring it back to A from A’ the country has to sell off its Foreign assets.
Radelet, Steven, and Jeffrey D. Sachs. “Currency Crises.” The National Bureau of Economic Research. National Bureau of Economic Research, Jan. 2000. Web. 10 Dec. 2013. .
Warwick J. McKibbin, and Andrew Stoeckel. “The Global Financial Crisis: Causes and Consequences.” Lowy Institute for International Policy 2.09 (2009): 1. PDF file.
Asian financial crisis in 1997 is a good example to demonstrate the globalisation as a single issue in one country will motivate a domino effect on other countries. Since the crisis stared in Thailand because of the fail in banking system, a political upheaval was triggered in South Korea and Indonesia. At the same time, financial centres in New York, London, Hong Kong and Tokyo were also affected in this crisis. During the crisis, global news agencies utilised the Internet and telegraph updating news to their home countries. Such as the Economist, Reuters and the Financial Times which ar...