Crisis :: essays research papers

On the 2nd of July 1997, Asia was meet by one of the most devastating financial crises it has ever seen. Of solely the financial crisis that have taken place, this was one of the most distressing in that it was totally unexpected. The purpose of this paper is to show that particular developmental strategies employ by these economies eventually led to their downfall. It will attempt to find divulge where the origins of the crisis lie, and what events started the cycle that eventuated with this disaster. In order to trace the events that led to the eventual fragmentise of the Asian economies, one must venture across the ocean to the unite States. The issue of lib timelisation first gained attention in the US during the Regan Administration. However, it was during the Clinton era that liberalisation became a top priority. Whereas previous governments had pushed for the liberalisation of Japan, one of Clintons main foreign policy objectives was the liberalisation of the Asian econ omies. This process was pushed forward in Asia with such vehemence because the region held a lot of enthronisation opportunities for American Banks, Brokerages, and other financial sector businesses. Unfortunately, Asias economies were not structurally ready to deal with the influx of capital that was headed their way. They had weak banking and legal systems that were un equal, or unwilling, to regulate the flow of foreign capital in the country. The Americans eventually persuaded Korea to depressurise its capital flow regulations by giving it the option of joining the agreement for Economic Co-operation and Development. Even indeed, Korea was concerned that its financial institutions may not be able to deal with an influx of foreign capital. One fatal mistake that Korea, as well as other Southeast Asian countries made, was that they receptive their capital markets in the wrong way. They did not allow long circumstance investments in Korean companies, but rather, only short- term investments that could be take away easily. One example of the sort of quick investments that were being made in Asia can be seen in the Japanese. In Japan the interest grade were very low, so investors would borrow at 2 percent and then convert their property into Thai baht. Due to the interest rate differential, they were able to make a lot of money off simple currency conversion. Other Asian economies were quick to follow suit, and soon there was a movement of huge amounts of capital into the region.