Asian Financial Crisis Essay

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:
AND (All these things I just told you about triggered the stock market to flop.

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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: (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:
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:
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:
(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: 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.


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