Asian Financial Crisis
Have you ever been in a situation where you
were low cash and in debt? Well, I
know I have. I remember one time when I
had used up all of my money for the
month, and owed, at the same time, my
sister ten dollars. Boy, that was pure
hell. You can’t buy anything, and you
feel like you have no control over
anything. Well, imagine an entire
continent in a financial rut. That is what is
currently going on in Asia.
This dilemma is known as the Asian Financial Crisis.
Now, what exactly is
the Asian Financial Crisis? Well, it is the current
imbalance of Asia’s
economy. While some areas are doing great, most areas are
poor and
economically unstable . Currency value has gone down drastically, the
stock
market is at an all time low, and people all over the continent are
fearing
for their futures. The United Nations definitely should get involved in
this
crisis. They should have been more involved in international loaning,
which
would have helped, if not prevented the debt Asia is in now. They also
should
have made sure that the currency rate stayed stable the second the
stock market
began to drop. Perhaps, if the UN was more involved in Asia’s
economic affairs
this crisis would not be in this state of mishap. (There
were many things that
caused the Asian Financial Crisis. One of them would
have to be overseas
borrowing. It is very important to understand that if the
country is borrowing
from the rest of the earth its foreign debt will grow
over time. Thus, flows
(items on income and cash flow statements) translate
into changes in stocks
(balance sheet items, like family fortune, the stock
of capital, government
debt, and net foreign debt). So, in the end, Asian
countries borrowed too much,
and were careful too little. Companies in the
worst-hit countries, South Korea,
Indonesia and Thailand, borrowed
boundless sums of money as their economies
boomed. T Even worse, they
borrowed much of it in US dollars because interest
rates were much lower than
on their own currencies. The exchange rates of local
currencies were pegged
against the dollar, so they had no fears about having to
earn money in local
currency to pay back loans in dollars.hey didn’t realize
at the time what a
mess they were getting themselves into. Another thing to keep
in mind when
you try to figure out what caused the crisis was the fact the Asian
economic
strategy was very unorganized. See, their economy was based on trust,
not
organization and rules. The people who bought and borrowed and sold and
lent
were all "friends". That meant they could trust that their
"friend"
would not disobey disserve them. It meant that they could trust what
was going
on around them was right. It meant that they didn’t have to have
special rules
and laws to make sure that their customers acted morally. So,
think about what
happened when the old manager died, and some new guy came
in--Uh oh. Chaos
alert! ) website: http://1208.921.80/hotasia.htm AND
website: http://www.worldcom.nl/ni/issues/asia.htm
AND (All these things
I just told you about triggered the stock market to flop.
People, when
they get scared the market is about to drop, flea and quickly sell
all of
their stock. So, when people started to finally realize that what was
going
on was bad, they made it even worse by selling their stock causing the
stock
market to plunge even lower. So, all in all, a lot of not so good things
were
going around Asia and caused financial chaos in the Asian
countries.
Although the crisis was and is a continental issue, it
effected each country
differently. If the UN were to interfere with this
issue, they would need to
understand the problem from all different angles.
Each country needs a certain
from of help.) website:
http://208.240.92.80/adjustmt.htm (One of the countries
that was greatly
effected by the crisis was Japan. Until the nineties, the
Japanese
economy had been expanding rapidly and was doing unusually well. Then,
all of
a sudden, in 1990, there was a substantial drop in the stock market, and
in
real estate. In various ways Japan is both the cause and the soltion of
the
crisis on hand here. Especially because Japan remains the economic
locomotive of
the region. It ihas by far the largest economy. It was until
recently a 4
trillion dollar economy. That is just mammoth compared to any
other power. So
the rest of the region suffers as a result of Japan is not
maturing . Japan
really hasn't been developing at any sort of a rate in the
past 10 years. It's
had times when it's got up to 3% but generally it's
sloped back. Now it's in a
difficult possition, in effect of the rapid
recession, with growth down to 0.5%
or 1.0%. Japan's stock and bond markets
are artificially held up - even though
prices have come down - by the
government through the government buying its own
bonds, so people's savings
are invested in the government's own corruption. It
also buys the stock
markets so that those savings are invested in companies that
don't make any
profits and haven't for years. That means that a lot of money
that's saved by
the Japanese public, usually through the post office, disappears
into the
pockets of companies and local government and other areas which are
bankrupt
corporations of the state. Also, they bank debts which have built up
by
loaning both to Asia and the rest of the world over years. Japanese banks
have
lent this money randomly. They did not make any obvious effort to make
sure the
money eventually got returned to them.) website:
http://www.megastories.com/seasia/japan/japan.htm
The reason for that is
that they haven't supplied any of the necessary reforms
to turn Japan around.
Perhaps here the UN could help the Jappanise government
create these reforms.
They could buy the government stocks, instead of the
actual government so it
would not have to be artifically help up. Perhaps after
the UN gives the
stockmarket that little push it needs, real investors will
start buying the
bonds and stocks. This will get the stockmarket of Japan back
on track again.
(Another country to look at is Hong Kong. Hong has stayed- while
everyone
else has devalued - in a situation where it cannot support its currency
rate
against the US dollar. So, the peope of Hong Kong end up not being able
to
pay for all their daily needs for the price of things have zoomed. As
the
Chinese economy is shrinking so extravagantly that it's destroying
itself, all
possibilities for trade and investment in and out of China,
(which are primary
for Hong Kong) are dismissed. The economic problems that
Hong Kong are currently
dealing with are obviously associated to the Asian
financial crisis because the
breakdown of expansion across the region has
left Hong Kong on its own. Hong
Kong is deteriorating as an economy. )
website: http://www.megastories.com/seasia/hongkong/hongkong2.htm
The
solution to Hong Kongs main problem is obvious. Fix China!! China is the
main
reason, in my opinion, that Hong Kong is having these problems. They
are
loosing all sights of trade and such with the two countries, and that is
pretty
much what the economy of Hong Kong depends on. So, as soon as the UN
helps
China, Hong Kong will be well on its way to recovery. (Now, you
need ot keep
close in mind that the countries of Asia are not the only ones
being effected by
this terrifing crisis. there are massive layoffs are
occurring in the US, as a
result of tthe Asian financial crisis. People all
over are seeing the ugly face
of the Asian financil crisis. Here is an
exserpt from a website and e-zine that
helps people in the US find jobs:
"Well, wouldn't you know it. I started this
series a few weeks ago, telling
you how great the job market is, then the Asian
Financial Crisis rears
its ugly head. Despite the shortage of technical workers
and a robust US
economy, spotty to massive layoffs are occurring in vulnerable
industries.
Semiconductor, computer and manufacturing companies are among the
most
affected. Some forecasters say that the worst is yet to come. Before
you
accept a job, you'd be wise to find out if the company is in one of
the
vulnerable industries!" This is just one more effect of this
disastrous
crisis.) website:
http://jobsearchtech.miningco.com/library/weekly/aa070698.htm?terms=asian+financial+crisis+AND+new&COB=home
(Now
we’ve seen actual countries and the state they are in, but we
shouldn’t
forget how the people of Asia feel about what is going on. Believe
me, they are
not interested in what is going on. No, they are worried.
Worried beyond belief.
Including the US people, they are fearing that the
crisis will effect the US
stock market. I read an article the other day where
a reporter was interviewing
some university students in Asia. They spoke
about there fears of not being able
to continue there education and not being
able to find work after graduating.
Now is that a way to live? In fear of
loosing everything you live for because
the government could not take control
over the economy well enough? I don’t
think so! It is time to do something
about it! ) "Will Asia Hurt U.S.
Investors?" by Michael Griffis,
Dateline: 11/17/97 (There are many views on
what exactly to do about it.
Secretary of State, Madeline Albright, has her
opinion on the matter. The
financial crisis, she said, "is not something
that is just specific to Asia
where it began but is a global financial problem
and has to be dealt with not
just by the United States but by the other
industrialized countries working
with other countries in the world." She
said the steps for recovery are not
just American but suitable to free market
economies moving into the 21st
Century. Other people have different types of
ideas....the decision of Prime
Minister Mahatir Mohamad to fire and then arrest
his Deputy Prime Minister,
who also served as his Finance Minister, is another
desperate way of trying
to solve this crisis. Robert E. Rubin, announced that
"In the face of
this challenge, our first too is clear: to help stabilize the
immediate
crisis." Yet, what most find so unclear is how to actually perform
that task,
and that is what needs to be done as soon as possible. Well, looking
back, we
see that there are countries that were deeply effected, and countries
that
weren’t that badly effected by the crisis. We learned that Some of the
causes
for the crisis were too much over seas borrowing, the stock market
and
unorganization. We have successfully thought up different ways to solve
the
problem. But, what if the United Nations had gotten involved? What would
have
been different then?) website: http://www.ft.com/asia/ Well, I
definitely think
the UN should have gotten involved. Perhaps the
International Bank for
Reconstruction and Development (AKA the word bank)
and the International
Monetary Fund (the IMF) could have stepped in.After
all, the World Bank is there
to provide some leadership in international
economic thinking, and we should
have been doing better than others. They
should have been there when the first
signs of economic failure were shown
and they should have made sure the currency
rate stayed steady. Then they
should have guided the Asian countries on how to
increase their GNP. They
would have to increase their value of work and the
value and quantity of
their goods. Maybe even enough actually be worth the price
it ended up
costing because of inflation and the rise currency rate. Or perhaps
they
should have paid more attention to international borrowing. They should
of
made sure these countries only borrowed so much. They should have took
more of
an interest in the economic affairs of these countries, and made it a
point to
make them stop borrowing more than they can pay back in a matter of,
oh lets
say, 5 years (at the rate they were going at the time.). Perhaps,
then, we
would, will and could have a stable economy in Asia, the largest
continent in
the world.