East Asian Economic Crisis :: essays papers

East Asiatic scotch CrisisA large economic downturn in East Asia threatens to demise its nearly30 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 currency devaluations, bad banking practices, high foreign debt,loose government regulation, and corruption. out-of-pocket to East Asias large impact on the world economy, the panic in Thailand, Indonesia, Korea, and other 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 pass on countries ar Thailand, Indonesia, andSouth Korea. The panic began in Thailand in May of 1997 when speculators, confused about Thailands slowing economy, exces sive debt, and political instability devalued the baht as they fled for market-driven currencies like the American dollar. Indonesias economy soon fell soon aft(prenominal) when the rupiah hit a record low against the U.S. dollar. Indonesia is plagued by more than $70 cardinal worth of bad debts and a corrupt and inefficient government.Thailand and Indonesia as well suffer from being overbuilt during real estatebooms that Reven2 were the result of long influxes of funds 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 moved(p) 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 arrest bad banks loansof up to $1 trillion. The banks lend 66% of Chinas investment working capital to state-run industries that only produce 12% of Chinas industrial output (Manning 2). Malaysia and the Philippines are two faced with devalued c urrencies and lowered stock markets(Lochhead 5).The implications of the Asian financial crisis are many. Adeclining Asian economy go forth reduce demand for U.S. and other countriesexports. The devalued currencies of East Asia will make Asian imports seencheap and will lead to increased American imports, thus increasing our trade shortage (Lochhead 2). A worldwide banking emergency could result if the embattled Asian economies failed to reach back their loans to the U.S. and other countries (Duffy 2). If the Asian economies fall further, in a appetite to raise cash, they might sell the hundreds of billion dollars of U.S. treasuries they now own, leading to higher(prenominal) interest rates and an American recession (Lacayo 2).