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    Asian Financial Crisis Essay (1937 words)

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    Have you ever been in a situation where you were low cash and in debt? Well, Iknow I have. I remember one time when I had used up all of my money for themonth, and owed, at the same time, my sister ten dollars. Boy, that was purehell.

    You can’t buy anything, and you feel like you have no control overanything. Well, imagine an entire continent in a financial rut. That is what iscurrently 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 currentimbalance of Asia’s economy. While some areas are doing great, most areas arepoor and economically unstable . Currency value has gone down drastically, thestock market is at an all time low, and people all over the continent arefearing for their futures. The United Nations definitely should get involved inthis crisis. They should have been more involved in international loaning, whichwould have helped, if not prevented the debt Asia is in now.

    They also shouldhave made sure that the currency rate stayed stable the second the stock marketbegan to drop. Perhaps, if the UN was more involved in Asia’s economic affairsthis crisis would not be in this state of mishap. (There were many things thatcaused the Asian Financial Crisis. One of them would have to be overseasborrowing.

    It is very important to understand that if the country is borrowingfrom 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, governmentdebt, 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 economiesboomed. T Even worse, they borrowed much of it in US dollars because interestrates were much lower than on their own currencies.

    The exchange rates of localcurrencies were pegged against the dollar, so they had no fears about having toearn money in local currency to pay back loans in dollars. hey didn’t realizeat the time what a mess they were getting themselves into. Another thing to keepin mind when you try to figure out what caused the crisis was the fact the Asianeconomic strategy was very unorganized. See, their economy was based on trust,not organization and rules. The people who bought and borrowed and sold and lentwere all “friends”.

    That meant they could trust that their “friend”would not disobey disserve them. It meant that they could trust what was goingon around them was right. It meant that they didn’t have to have special rulesand laws to make sure that their customers acted morally. So, think about whathappened when the old manager died, and some new guy came in–Uh oh.

    Chaosalert! ) website: http://1208. 921. 80/hotasia. htm AND website: http://www. worldcom.

    nl/ni/issues/asia. htmAND (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 sellall of their stock. So, when people started to finally realize that what wasgoing on was bad, they made it even worse by selling their stock causing thestock market to plunge even lower. So, all in all, a lot of not so good thingswere going around Asia and caused financial chaos in the Asian countries.

    Although the crisis was and is a continental issue, it effected each countrydifferently. If the UN were to interfere with this issue, they would need tounderstand the problem from all different angles. Each country needs a certainfrom of help. ) website: http://208. 240.

    92. 80/adjustmt. htm (One of the countriesthat was greatly effected by the crisis was Japan. Until the nineties, theJapanese 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, andin real estate. In various ways Japan is both the cause and the soltion of thecrisis on hand here.

    Especially because Japan remains the economic locomotive ofthe region. It ihas by far the largest economy. It was until recently a 4trillion dollar economy. That is just mammoth compared to any other power. Sothe rest of the region suffers as a result of Japan is not maturing .

    Japanreally hasn’t been developing at any sort of a rate in the past 10 years. It’shad times when it’s got up to 3% but generally it’s sloped back. Now it’s in adifficult 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 thoughprices have come down – by the government through the government buying its ownbonds, so people’s savings are invested in the government’s own corruption. Italso buys the stock markets so that those savings are invested in companies thatdon’t make any profits and haven’t for years. That means that a lot of moneythat’s saved by the Japanese public, usually through the post office, disappearsinto the pockets of companies and local government and other areas which arebankrupt corporations of the state.

    Also, they bank debts which have built up byloaning both to Asia and the rest of the world over years. Japanese banks havelent this money randomly. They did not make any obvious effort to make sure themoney eventually got returned to them. ) website: http://www. megastories.

    com/seasia/japan/japan. htmThe reason for that is that they haven’t supplied any of the necessary reformsto turn Japan around. Perhaps here the UN could help the Jappanise governmentcreate these reforms. They could buy the government stocks, instead of theactual government so it would not have to be artifically help up.

    Perhaps afterthe UN gives the stockmarket that little push it needs, real investors willstart buying the bonds and stocks. This will get the stockmarket of Japan backon track again. (Another country to look at is Hong Kong. Hong has stayed- whileeveryone else has devalued – in a situation where it cannot support its currencyrate against the US dollar. So, the peope of Hong Kong end up not being able topay for all their daily needs for the price of things have zoomed. As theChinese economy is shrinking so extravagantly that it’s destroying itself, allpossibilities for trade and investment in and out of China, (which are primaryfor Hong Kong) are dismissed.

    The economic problems that Hong Kong are currentlydealing with are obviously associated to the Asian financial crisis because thebreakdown of expansion across the region has left Hong Kong on its own. HongKong is deteriorating as an economy. ) website: http://www. megastories. com/seasia/hongkong/hongkong2.

    htmThe solution to Hong Kongs main problem is obvious. Fix China!! China is themain reason, in my opinion, that Hong Kong is having these problems. They areloosing all sights of trade and such with the two countries, and that is prettymuch what the economy of Hong Kong depends on. So, as soon as the UN helpsChina, Hong Kong will be well on its way to recovery.

    (Now, you need ot keepclose in mind that the countries of Asia are not the only ones being effected bythis terrifing crisis. there are massive layoffs are occurring in the US, as aresult of tthe Asian financial crisis. People all over are seeing the ugly faceof the Asian financil crisis. Here is an exserpt from a website and e-zine thathelps people in the US find jobs: “Well, wouldn’t you know it. I started thisseries a few weeks ago, telling you how great the job market is, then the AsianFinancial Crisis rears its ugly head. Despite the shortage of technical workersand a robust US economy, spotty to massive layoffs are occurring in vulnerableindustries.

    Semiconductor, computer and manufacturing companies are among themost affected. Some forecasters say that the worst is yet to come. Before youaccept a job, you’d be wise to find out if the company is in one of thevulnerable industries!” This is just one more effect of this disastrouscrisis. ) 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’tforget how the people of Asia feel about what is going on. Believe me, they arenot 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 USstock market.

    I read an article the other day where a reporter was interviewingsome university students in Asia. They spoke about there fears of not being ableto 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 becausethe government could not take control over the economy well enough? I don’tthink 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 onwhat exactly to do about it.

    Secretary of State, Madeline Albright, has heropinion on the matter. The financial crisis, she said, “is not somethingthat is just specific to Asia where it began but is a global financial problemand has to be dealt with not just by the United States but by the otherindustrialized countries working with other countries in the world. ” Shesaid the steps for recovery are not just American but suitable to free marketeconomies moving into the 21st Century. Other people have different types ofideas. . .

    . the decision of Prime Minister Mahatir Mohamad to fire and then arresthis Deputy Prime Minister, who also served as his Finance Minister, is anotherdesperate 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 theimmediate crisis.

    ” Yet, what most find so unclear is how to actually performthat task, and that is what needs to be done as soon as possible. Well, lookingback, we see that there are countries that were deeply effected, and countriesthat weren’t that badly effected by the crisis. We learned that Some of thecauses for the crisis were too much over seas borrowing, the stock market andunorganization. We have successfully thought up different ways to solve theproblem.

    But, what if the United Nations had gotten involved? What would havebeen different then?) website: http://www. ft. com/asia/ Well, I definitely thinkthe UN should have gotten involved. Perhaps the International Bank forReconstruction and Development (AKA the word bank) and the InternationalMonetary Fund (the IMF) could have stepped in. After all, the World Bank is thereto provide some leadership in international economic thinking, and we shouldhave been doing better than others. They should have been there when the firstsigns of economic failure were shown and they should have made sure the currencyrate stayed steady.

    Then they should have guided the Asian countries on how toincrease their GNP. They would have to increase their value of work and thevalue and quantity of their goods. Maybe even enough actually be worth the priceit ended up costing because of inflation and the rise currency rate. Or perhapsthey should have paid more attention to international borrowing. They should ofmade sure these countries only borrowed so much. They should have took more ofan interest in the economic affairs of these countries, and made it a point tomake them stop borrowing more than they can pay back in a matter of, oh letssay, 5 years (at the rate they were going at the time.

    ). Perhaps, then, wewould, will and could have a stable economy in Asia, the largest continent inthe world.

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