Asian Crisis Essay

668 words - 3 pages

The financial crisis that erupted in Asia in mid-1997 has led
to sharp declines in the currencies, stock markets, and other
asset prices of a number of Asian countries. It is hard to
understand what these declines will actually do to the world
market. This decline is expected to halve the rate of world
growth in 1998 from the four percent that was projected
pre-crisis to an estimated outcome of about 2 percent. The
countries that are included in the East Asian crisis, known as
"Tiger" economies, are Hong Kong, Indonesia, South Korea,
Malaysia, the Philippines, Singapore, Taiwan and Thailand. For
these countries to participate effectively in the exchange of
goods, services, and assets, an international monetary system
is needed to facilitate economic transactions. To be effective
in facilitating movement in goods, services, and assets, a
monetary system most importantly requires an efficient balance
of payments adjustment mechanism so that deficits and
surpluses are not prolonged but are eliminated with relative
ease in a reasonably short time period. The Asian crisis of
recent falls into this category of inefficient balance of
payments facilitated by depreciation of its currency. By
competitively depreciating its currencies, Asia is exporting
its deflation, its overcapacity and its lack of growth to the
West, particularly to the US. History The past ten or fifteen
years have seen an unprecedented expansion in the extent to
which the countries of the world are tied together, both by
instant communication and by international trade,
institutions, and markets, including financial markets. On the
whole, this process of globalization has been an enormously
positive development. It has opened new markets, enhanced
competition, spurred innovation, and provided new
opportunities for workers, farmers, and businesses around the
world. For example more than 40 percent of US exports today
are absorbed by developing countries, an extraordinary
increase over past export patterns, and the jobs associated
with these exports are high-paying, good jobs. The increasing
productivity of our trading partners has helped keep inflation
down and improve standards of living in the United States. And
outside the US, probably hundreds of millions of people have
been lifted out of poverty around the world by the economic...

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