East Asian Economic Crisis :: essays papers

East Asiatic Economic CrisisA large economic downturn in East Asia threatens to end its around30 year run of high growth rates. The crisis has caused Asian currenciesto fall 50-60%, stock markets to decline 40%, banks to close, and propertyvalues to drop. The crisis was brought on by bullion devaluations, bad banking practices, high foreign debt,loose government regulation, and corruption. Due to East Asias large impact on the world economy, the panic in Thailand, Indonesia, Korea, andformer(a) Asian countries has prompted other countries to worry about the affect on their own economies and offer aid to the financially troubled nations (Sanger 1).The East Asian crisis has affected almost all of the Asiannations, but the three hardest hit countries are Thailand, Indonesia, andSouth Korea. The panic began in Thailand in May of 1997 when speculators,worried about Thailands slowing economy, exces sive debt, and political instability fast the baht as they fled for market-driven curren cies like the American dollar. Indonesias economy soon fell soon after when the rupiah hit a record low against the U.S. dollar. Indonesia is plagued by much than $70 billion worth of bad debts and a corrupt and inefficient government.Thailand and Indonesia also suffer from being overbuilt during real estatebooms that Reven2 were the result of huge influxes of gold by optimistic foreigninvestors. South Korea faltered under the weight of its huge foreign debt,decreasing exports, and weakening currency (Lochhead 4-5).Other major countries touched by the crisis are Japan, China,Malaysia, and the Philippines. Japans economy is burdened by $300 billionin bad bank loans and a recession. Chinese banks may carry bad banks loansof up to $1 trillion. The banks lend 66% of Chinas investment capital to state-run industries that only produce 12% of Chinas industrial output (Manning 2). Malaysia and the Philippines are both faced with devalued currencies and let down stock markets(Lochhead 5). The implications of the Asian financial crisis are many. Adeclining Asian economy will reduce demand for U.S. and other countriesexports. The devalued currencies of East Asia will bring on Asian imports seencheap and will lead to increased American imports, thus increasing our trade deficit (Lochhead 2). A worldwide banking emergency could result if the castellated Asian economies failed to pay back their loans to the U.S. and other countries (Duffy 2). If the Asian economies fall further, in a desire to raise cash, they might sell the hundreds of billion dollars of U.S. treasuries they now own, take to higher interest rates and an American recession (Lacayo 2).