Asian currency crisis Nowadays political and economical changes have global significance though they have been started as regional ones. It is due to the globalization of our lifes process with the development of technical progress. Some events may cause serious damage to the world if certain measures will not be taken. It goes without saying that market dictates its terms to the state, banks and policy. But the processes in one country or region are closely connected with changes in others. In Bangkok in July, 1997 some great changes occurred.
Those changes could be regarded as the global ones. They were called the Asian currency crisis and attracted attention of the whole world. The problem is that Asian countries’ trade is larger comparing with Western countries trade. At present a lot of Western countries are trading more with Asian ones then with each other. And the most important fact is that due to the so-called “East Asian miracle” Asian countries could lift many people out of poverty. Between 1990 and 1995 governments of Asian countries proclaimed the policy which was aimed to create large business communities and enterprises. Some kind of premiums were given for growth.
But there was another side of the policy. There were several sources to start-up business. First of all the policy attracted foreign traders to invest their money in Asian enterprises. A great number of enterprises lent money from banks, not through the sale of stocks. The way was though more profitable but more risky as well. In 1997 Japan and the United States were the main countries that borrowed money at low interest rates.
The Essay on Rapid Economic Growth In East Asian Countries
Rapid Economic Growth In East Asian Countries Over the past decade, there has been rapid long-term economic growth for East Asian countries. These newly industrializing countries are experiencing growth rates in GDP per head at around 6% to 7% compared to the 2%to 3% for most industrial economies. If this growth continues, South Korea and Taiwan might take away America's distinction as the world's ...
They provided the world with cheap-but-reliable money. Specialized traders often treated to those countries to borrow money and later invested them into countries economy. A large amount was invested into Asian businesses. There were good conditions for such investments. In East Asia banks proposed some forms of bonds, such as short-term, high-yielding certificates, and the currency in those countries was at the same rate to the dollar for a long period of time. For traders it was a good way to make money. It should be mentioned that is a great deal of money is operated on global currency markets.
The sum is not controlled by any sovereign state. The operations with the sum can be fulfilled with the help of modern communications. A huge sum of money is converted in the global marketplace and every day about $1.5 trillion is exchanged. As well as great sums of money can be converted so quickly market decisions can influence the economy of a country. At the beginning on summer 1997 Japan and America discussed some measures to raise interest rates. The news impacted greatly the traders.
They decided to liquidate their investments in Asia. Banks had no opportunity to return money. One sum was lost because of corruption and the rest was invested into businesses. The situation led to a crisis over cash. A currency crisis was inevitable. Banks incurred great losses. They were provoked with large increases of fiscal deficits in East Asia.
Even before the currency crisis it was clear that the banks would have troubles. For traders it was less risky to invest their money into familiar companies where they could purchase stocks. The Asian Currency crisis is the best example that market is a flexible and changeable model which quickly reacted any political or economic changes. Nowadays with modern technologies, Internet and mass media traders do not wait the results of the changes but take any possible opportunities to insure their capital. The events affected many countries. With the purpose to improve economic situation in East Asia and in the world urgent short-term measures were taken. A lot of countries dealt with the crisis. They had to reviewed their economic policies as soon as it became evident that East Asia had great problems.
The Review on Impact of Financial Crisis on International Trade
The work described in this paper was substantially supported by a grant from the Research Grant Council of the Hong Kong Special Administrative Region, China (Project no. HKUST6212/00H). 253 254 Zihui Ma and Leonard K. Cheng Forbes (2001) went further to construct some statistics measuring the importance of trade linkages in transmitting crises. Because most economists agree that international ...
The crisis proved that very often business decisions are not very good for political economy of a country.
Bibliography:
The World After the Asian Currency Crisis. Institute of international education, March, 1999. http://www.argmax.com/mt_blog/archive/000231.php.
