Compare and Contrast the East Asian and Argentine Crisis
Compare and contrast the Crisis of East Asia and the Argentine Crisis. What lessons can be learnt?
“A financial crisis is “a situation where the supply of money is outpaced for the demand of money” (buisnessdictionary.com). It is necessary to first distinguish the three principal types of crisis which can be experienced individually or as a result of each other. The first type of crisis could be a banking crisis wherein people lose confidence in their banking system and systematically withdraw all of their savings. The second is an exchange rate crisis where inhabitants become worried about the strength of their currency and exchange it – in the context of this essay, into dollars. Thirdly is an external debt crisis which commences from an increase in foreign debt and no more loans are provided to a country as there is some perceived doubt that they will not be able to guarantee investment.
The East Asian crisis is particularly astounding as it attacked some of the fastest growing economies. After such rapid growth in capital often described as the “Asian Miracle” how did a crisis in East Asia occur when the region had so much promise?
The miracle that had occurred created a region rife with over investment and the success of the economies was taken for granted. Primarily, signs of the crisis started to emerge in Thailand with the collapse of their currency – the “baht” and it then became pegged to the US dollar. The crisis is now at an end but mainly due to the errors of the International Monetary Fund (IMF), it could take years for these countries to get back to their previous economic conditions. “… IMF policies not only exacerbated the downturn but were partially responsible for the onset…” (Stiglitz 2002, pp 89) East Asia didn’t actually need any additional capital that they were pressured into receiving. South Korea for example was a region that had experienced admirable growth but realised the necessity for some deregulation or liberalisation. The US
“A financial crisis is “a situation where the supply of money is outpaced for the demand of money” (buisnessdictionary.com). It is necessary to first distinguish the three principal types of crisis which can be experienced individually or as a result of each other. The first type of crisis could be a banking crisis wherein people lose confidence in their banking system and systematically withdraw all of their savings. The second is an exchange rate crisis where inhabitants become worried about the strength of their currency and exchange it – in the context of this essay, into dollars. Thirdly is an external debt crisis which commences from an increase in foreign debt and no more loans are provided to a country as there is some perceived doubt that they will not be able to guarantee investment.
The East Asian crisis is particularly astounding as it attacked some of the fastest growing economies. After such rapid growth in capital often described as the “Asian Miracle” how did a crisis in East Asia occur when the region had so much promise?
The miracle that had occurred created a region rife with over investment and the success of the economies was taken for granted. Primarily, signs of the crisis started to emerge in Thailand with the collapse of their currency – the “baht” and it then became pegged to the US dollar. The crisis is now at an end but mainly due to the errors of the International Monetary Fund (IMF), it could take years for these countries to get back to their previous economic conditions. “… IMF policies not only exacerbated the downturn but were partially responsible for the onset…” (Stiglitz 2002, pp 89) East Asia didn’t actually need any additional capital that they were pressured into receiving. South Korea for example was a region that had experienced admirable growth but realised the necessity for some deregulation or liberalisation. The US
Bibliography: 2. Sachs D, 1989. Developing Country Debt and Economic Performance: The international financial system. Chicago: The University of Chicago Press 3 4. Islam I, Chowdhury A, 2000. The political economy of East Asia: Post-crisis debates. Oxford University Press 5 6. McLeod R H, Garnaut R, 1998. East Asia in Crisis: From being a miracle to needing one? Routledge 7 8. Dicken P, 2007. Global Shift: Mapping the Changing Contours of The World Economy. 5th ed. Sage 9 1. Documentary - Argentina Solanas, P (2004) Memoria del Saqueo