The East Asia Crisis - How Imf Policies Brought the World to the Verge of a Global Meltdown
THE EAST ASIA CRISIS
How IMF Policies Brought the World to the Verge of a Global Meltdown
The International Monetary Fund was created in 1945, after the 2nd World War, to help promote the health of the world economy. Its primary responsibilities include the promotion of international monetary cooperation, the promotion of exchange and economic stability and the control of a balanced growth of international trade. The IMF is also responsible, through its policies, to provide any resources available to countries facing economic difficulties in order to help them recover.
Unfortunately in the case of countries in East Asia the IMF policies did not manage to be successful and they were a very important factor causing one of the greatest economic crises ever. The collapse of the Thai baht, on 2 July 1997, marked the beginning of the crisis. The baht lost its value by almost 25% overnight and speculators spread and hit Malaysia, Korea, the Philippines and Indonesia and by the end of 1997 banks, stock markets and entire economies were threatened. The policies that the IMF imposed during that period were not of any help and they worsened the situation. These failures of the IMF lead many people to call for reforms in its policies, since it was founded primarily to prevent such crises from taking place. It is true that in the case of East Asia the IMF policies did not only made things worse, but were responsible for the crisis. The excessively rapid financial, as well as capital market liberalization was probably the most important cause of this economic disaster.
Ironically, a few months before the crisis, the IMF had forecast strong growth in the area based on the fact that during the last 30 years East Asia was growing faster, doing better and was more stable than any other region. In fact, because of its excellent performance it was called the “East Asia Miracle”. After the crisis broke out, the IMF in an attempt to cover its mistakes, accused the Asian
How IMF Policies Brought the World to the Verge of a Global Meltdown
The International Monetary Fund was created in 1945, after the 2nd World War, to help promote the health of the world economy. Its primary responsibilities include the promotion of international monetary cooperation, the promotion of exchange and economic stability and the control of a balanced growth of international trade. The IMF is also responsible, through its policies, to provide any resources available to countries facing economic difficulties in order to help them recover.
Unfortunately in the case of countries in East Asia the IMF policies did not manage to be successful and they were a very important factor causing one of the greatest economic crises ever. The collapse of the Thai baht, on 2 July 1997, marked the beginning of the crisis. The baht lost its value by almost 25% overnight and speculators spread and hit Malaysia, Korea, the Philippines and Indonesia and by the end of 1997 banks, stock markets and entire economies were threatened. The policies that the IMF imposed during that period were not of any help and they worsened the situation. These failures of the IMF lead many people to call for reforms in its policies, since it was founded primarily to prevent such crises from taking place. It is true that in the case of East Asia the IMF policies did not only made things worse, but were responsible for the crisis. The excessively rapid financial, as well as capital market liberalization was probably the most important cause of this economic disaster.
Ironically, a few months before the crisis, the IMF had forecast strong growth in the area based on the fact that during the last 30 years East Asia was growing faster, doing better and was more stable than any other region. In fact, because of its excellent performance it was called the “East Asia Miracle”. After the crisis broke out, the IMF in an attempt to cover its mistakes, accused the Asian