East Asian financial crisis: Information from...

East Asian financial crisis
The East Asian financial crisis was afinancial crisis that started in July 1997 inThailand and affectedcurrencies,stock markets, and other asset prices in several Asian countries, many consideredEast Asian Tigers. It is also commonly referred to as the East Asian currency crisis or locally as the IMF crisis although the latter is somewhat controversial.
Indonesia,South Korea andThailand were the countries most affected by the crisis.Hong Kong,Malaysia,Laos and thePhilippines were also hit by the slump.Mainland China,Taiwan,Singapore andVietnam were relatively unaffected.Japan was not affected much by this crisis but was going through its own long-term economic difficulties. However, all nations mentioned above saw their currencies dip significantly relative to the US dollar, though the harder hit nations saw extended currency losses.
Though called the "East Asian" crisis because it originated inEast Asia, its effects rippled throughout the globe and caused a global financial crisis, with major effects felt as widely asRussia,Brazil, as investors lost confidence inemerging markets.United States as an investor was briefly affected.
History and causes
Until 1997, Asia attracted almost half of total capital inflow todeveloping countries. The economies ofSoutheast Asia in particular maintained highinterest rates attractive to foreign investors looking for a high rate of return. As a result the region‘s economies received a large inflow ofhot money and experienced a dramatic run-up in asset prices. At the same time, the regional economies ofThailand,Malaysia,Indonesia, thePhilippines,Singapore, andSouth Korea experienced high, 8-12% GDP growth rates in the late1980s and early1990s. This achievement was broadly acclaimed by economic institutions including theIMF andWorld Bank, and was known as part of the Asian economic miracle.
Whatever the disputed causes, the Asian crisis started in mid-1997 and affected currencies, stock markets, and other asset prices of several Southeast Asian economies. Triggered by events in Latin America, particularly after theMexican peso crisis of 1994, Western investors lost confidence in securities in East Asia and began to pull money out, creating a domino effect.
In 1994,Princeton University (thenMIT)economistPaul Krugman published an article attacking the idea of an Asian economic miracle.[1] He argued that East Asia‘s economic growth had historically been the result of capital investment, leading to growth inproductivity. However,total factor productivity had increased only marginally or not at all. Krugman argued that only growth in total factor productivity, and not capital investment, could lead to long-term prosperity. Krugman would be seen by many as prescient after the financial crisis became full-blown, though he himself stated that he had not predicted the crisis or foreseen its depth.
At the time Thailand, Indonesia and South Korea had large privatecurrent account deficits and the maintenance ofpegged exchange rates encouraged external borrowing and led to excessive exposure to foreign exchange risk in both the financial and corporate sectors. In the mid-1990s, two factors began to change their economic environment. As theU.S. economy recovered from a recession in the early 1990s, theU.S. Federal Reserve Bank underAlan Greenspan began to raise U.S. interest rates to head off inflation. This made the U.S. a more attractive investment destination relative to Southeast Asia, which had attracted hot money flows through high short-term interest rates, and raised the value of the U.S. dollar, to which many Southeast Asian nations‘ currencies were pegged, thus making their exports less competitive. At the same time, Southeast Asia‘s export growth slowed dramatically in the spring of 1996, deteriorating their current account position.
Some economists have advanced the impact of Mainland China on thereal economy as a contributing factor to theirASEAN nations‘ export growth slowdown, though these economists maintain the main cause of the crises was excessive real estate speculation. China had begun to compete effectively with other Asian exporters particularly in the 1990s after the implementation of a number of export-oriented reforms. Most importantly, the Thai and Indonesian currencies wereclosely tied to the dollar, which was appreciating in the 1990s. Western importers sought cheaper manufacturers and found them, indeed, in China whose currency was depreciated relative to the dollar. Other economists dispute this claim noting that both ASEAN and China experienced simultaneous rapid export growth in the early 1990s.
Many economists, like those within theCato Institute, believed that the Asian crisis was created not by market psychology or technology (which actually represents a more efficient form of capitalism through the ability to acquire information cheaply and more quickly) but by macroeconomic policies that distorted information which in turn created the volatility that attracted speculators. What some have called "herd mentality" was merely the result of speculators behaving rationally, noting the currency policies (The government defending the fixed exchange rate) which speculators assumed could not be sustained. Such economists believe that this crisis was the result of unsustainable macroeconomic/protectionist policies which create the very "market" imperfections they were originally designed to correct.
Other economists, includingJoseph Stiglitz andJeffrey Sachs, have downplayed the role of the real economy in the crisis compared to the financial markets due to the speed of the crisis. The rapidity with which the crisis happened has prompted Sachs and others to compare it to a classicbank run prompted by a sudden risk shock. Sachs points to strict monetary and contractory fiscal policies implemented by the governments at the advice of the IMF in the wake of the crisis, whileFrederic Mishkin points to the role ofasymmetric information in the financial markets that led to a "herd mentality" among investors that magnified a relatively small risk in the real economy. The crisis has thus attracted interest frombehavioral economists interested inmarket psychology.
The foreign ministers of the 10 ASEAN countries believed that the well co-ordinated manipulation of currencies was a deliberate attempt to destabilise the ASEAN economies. Former Malaysian Prime MinisterMahathir Mohamad accused currency speculatorGeorge Soros of ruining Malaysia‘s economy with massivecurrency speculation. At the 30th ASEAN Ministerial Meeting held inSubang Jaya,Malaysia, they issued a joint declaration on 25 July 1997 expressing serious concern and called for further intensification of ASEAN‘s cooperation to safeguard and promote ASEAN‘s interest in this regard.[2] Coincidentally, on that same day, the Central Bankers of most of the affected countries were at the EMEAP (Executive Meeting of East Asia Pacific) meeting inShanghai, and they failed to make the New Arrangement to Borrow operational. A year earlier, the finance ministers of these same countries had attended the 3rdAPEC finance ministers meeting inKyoto,Japan on 17 March 1996, and according to that joint declaration, they had been unable to double the amounts available under the General Agreement to Borrow and the Emergency Finance Mechanism. As such, the crisis could be seen as the failure to adequately build capacity in time, to prevent currency manipulation.
IMF and controversy

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The role of theInternational Monetary Fund (IMF) was very controversial during the crisis, causing many locals to call the crisis the "IMF crisis." To begin with, many commentators in retrospect criticized the IMF for encouraging the developing economies of Asia down the path of "fast track capitalism", meaning liberalization of the financial sector (i.e. elimination of restrictions on capital flows); maintenance of high domestic interest rates in order to suck in portfolio investment and bank capital; and pegging of the national currency to the dollar to reassure foreign investors against currencyrisk.[3].
However, the greatest criticism of the IMF‘s role in the crisis was targeted towards its response. As country after country fell into crisis, many local businesses and governments that had taken out loans in US dollars, which suddenly became much more expensive relative to the local currency which formed their earned income, found themselves unable to pay their creditors. The dynamics in this scenario were similar to that of theLatin American debt crisis.
In response, the IMF offered to step in the case of each nation and offer it a multi-billion dollar "rescue package" to enable these nations to avoid default. However, the IMF‘s support was conditional on a series of drastic economic reforms influenced byneoliberal economic principles called astructural adjustment package (SAP). The SAP‘s called on crisis nations to cut government spending to reduce deficits, allow insolvent banks and financial institutions to fail, and aggressively raise interest rates. The reasoning was that these steps would restore confidence in the nations‘ fiscal solvency, penalize insolvent companies, and protect currency values. However, the effects of the SAP‘s were mixed and their impact controversial. Critics, however, noted the contractionary nature of these policies, arguing that in a recession, the traditionalKeynesian response is to increase government spending, prop up major companies, and lower interest rates. The reasoning was that by stimulating the economy and staving off recession, governments could restore confidence while preventing economic pain. They pointed out that theU.S. government pursued expansionary policies, such as lowering interest rates, increasing government spending, and cutting taxes, when the U.S. itself entered a recession in2001.
Thailand
Exchange rate: Baht per U.S. Dollar
From 1985 to 1995,Thailand‘s economy grew at an average of 9%. On14 May and15 May1997, thebaht, the local currency, was hit by massive speculative attacks. On30 June, Prime MinisterChavalit Yongchaiyudh said that he would notdevalue the baht, but Thailand‘s administration eventually floated the local currency, on2 July. Opposition parties had claimed that future Thai Prime MinisterThaksin Shinawatra profited from the devaluation[4][5], although subsequent Opposition party-led governments did not investigate the issue.
In 1996, an Americanhedge fund had already sold $400 million of the Thai currency. From 1985 until2 July1997, the baht was pegged at 25 to the dollar. The baht dropped very swiftly and lost half of its value. The baht reached its lowest point of 56 to the dollar in January 1998. The Thai stock market dropped 75% in 1997. Finance One, the largest Thai finance company collapsed. On11 August, theIMF unveiled a rescue package for Thailand with more than 16 billion dollars. The IMF approved on20 August, another bailout package of 3.9 billion dollars. The baht has only recently in August 2006 reached pre-crisis highs of 37.3 to the dollar.
Philippines
ThePhilippinescentral bank raised interest rates by 1.75 percentage points in May 1997 and again by 2 points on19 June. Thailand triggered the crisis on2 July. On3 July, the Philippines central bank was forced to intervene heavily to defend thepeso, raising the overnight rate from 15% to 24%. The peso fell significantly, from 26 pesos per dollar at the start of the crisis, to 38 pesos in 2000, to 40 pesos by the end of the crisis.
During the tenure of former PresidentJoseph Estrada, the Philippine economy recovered from a contraction of .6 % in GDP during the worst part of the crisis to GDP growth of some 3% by 2001. Unfortunately, scandals rocked his administration in 2001, most notably the "jueteng" scandal, became a significant factor to calls for his ouster which caused significant falls in the share prices of companies listed on thePhilippine Stock Exchange. ThePSE Composite Index, the main index of the PSE, fell to some 1000 points from a high of some 3000 points in1997. The peso fell even further, trading from levels of about 35 pesos to 56 pesos. Later that year, he was impeached but was not voted out of office. Massive protests causedEDSA II, which led to his resignation and liftedGloria Macapagal-Arroyo to the Philippine presidency. Arroyo did manage to end the crisis in thePhilippines, which led to the recovery of the Philippine peso to about 50 pesos by the time Arroyo became president.
Hong Kong
The collapse of the Thai baht on July 2, 1997, came 24 hours after the United Kingdom handed over sovereignty of Hong Kong to the People‘s Republic of China. In October 1997, theHong Kong dollar, which was pegged at 7.8 to the US dollar, came under speculative pressure sinceHong Kong‘s inflation rate was significantly higher than that of the US for years. Monetary authorities spent more than US$1 billion to defend the local currency. Since Hong Kong has more than US$80 billion of foreign reserves, which is equivalent to 700% ofM1 money supply and 45% ofM3 money supply of Hong Kong,Hong Kong managed to keep the currency pegged to the US dollar despite the speculative attacks. Stock markets become more and more volatile; between20 October and23 October theHang Seng Index dipped by 23%.Hong Kong Monetary Authority promised to protect the currency. On15 August1998, Hong Kong raised rates overnight from 8% to 23% and at one point, to 500%. While the Monetary Authority recognized that the speculative forces were taking advantage of the unique currency board system, in which the overnight rates would automatically increase proportionally when the currency is sold in the market heavily, which would in turn increase the downward pressure of the stock market and thus allowing the speculators to earn a large profit byshort selling shares, the Monetary Authority started buying component shares of the Hang Seng Index in mid-August. The Monetary Authority andDonald Tsang, then Financial Secretary, declared war with speculators openly. The Government ended up buying approximately HK$120 billion (about US$15 billion) of shares of various companies, and becoming the largest shareholder of some of the companies (e.g. the government owned 10% ofHSBC) at the end of August when hostilities ended with the closing of the August contract of Hang Seng Index Futures. The Government started to divest itself from the position in 2001 and made a profit of about HK$30 billion (about US$4 billion) in the process.
Speculative actions against the Hong Kong Dollar and the stock market did not continue into September largely due to extraordinary reaction to speculators by the Malaysian authorities and the onset of the collapse of Russian bond and currency market, which caused massive loss to the speculators.
The currency peg between the Hong Kong Dollar and the US Dollar at 7.8:1 continued to exist undeterred.
South Korea
South Korea is the world‘s 10th largest economy. Macroeconomic fundamentals were good but the banking sector was burdened with non-performing loans as its large corporations were funding aggressive expansions. Excess debt would eventually lead to major failures and take-overs. For example, in July, South Korea‘s third largest car maker,Kia Motors asked for emergency loans. In the wake of the Asian market downturn,Moody‘s lowered thecredit rating of South Korea from A1 to A3, onNovember 28,1997, and downgraded again to B2 onDecember 11. That contributed to a further decline in Korean shares since stock markets were already bearish in November. The Seoul stock exchange fell by 4% on7 November1997. OnNovember 8, it plunged by 7% the biggest one-day drop recorded there to date. And onNovember 24, stocks fell another 7.2% on fears that the IMF would demand tough reforms. In 1998, Hyundai Motor took over Kia Motors. Samsung Motors‘ $5 billion dollar venture was dissolved due to the crisis, and eventuallyDaewoo Motors was sold off toGeneral Motors.
TheKorean won, meanwhile bonged to less than 1700 per dollar from less than 1000, however, despite initial sharp economic slowdown and many companies going bankrupt, Korea has managed to triple itsper capita GDP since the 1997 crisis to 2006 in dollar terms, continuing its growth from 1960 as the world‘s fastest growing economy in the period (1960-2006), per capita GDP having grown larger by 606 times from $80 capita to over $18,000. However, like thechaebol, South Korea‘s government didn‘t come out unscathed, as its national debt to GDP ratio more than tripled after the crisis.
Malaysia
Pre-crisis,Malaysia had a large current account deficit of 5% ofGDP. At the time, Malaysia was a top investment destination, and this was reflected inKLSE activity which was regularly the most active exchange in the world. (with turnover exceeding even markets with far higher capitalisation like theNYSE) . Expectations at the time were that the growth rate would continue, propelling Malaysia into developed status by 2020, a government policy articulated inWawasan 2020. As at start of 1997, the KLSECompositeindex was above 1,200, the ringgit was trading above 2.50 to the dollar, and the overnight rate was below 7%.
In July, within days of theThai baht devaluation, the Malaysianringgit was "attacked" byspeculators. The overnight rate jumped from under 8% to over 40%. This led to rating downgrades and a general sell off on the stock and currency markets. By end 1997, ratings had fallen many notches from investment grade tojunk, the KLSE had lost more than 50% from above 1,200 to under 600, and the ringgit had lost 50% of its value, falling from above 2.50 to under 3.80 to the dollar.
In 1998, the output of the real economy declined plunging the country into its firstrecession for many years. The construction sector contracted 23.5%, manufacturing shrunk 9% and the agriculture sector 5.9%. Overall, the country‘s gross domestic product plunged 6.2% in 1998. During the year, the ringgit plunged below 4.7 and the KLSE fell below 270. In September that year, various defensive measures were announced to overcome the crisis.
The principal measure taken were to move the ringgit from a free float to a fixed exchange rate regime.Bank Negara fixed the ringgit at 3.8 to the dollar. Capital controls were imposed. Various agencies were formed. The Corporate Debt Restructuring Committee dealt with corporate loans. Danaharta discounted and bought bad loans from banks to facilitate orderly asset realization. Danamodal recapitalised banks.
Growth then settled at a slower but more sustainable pace. The massive current account deficit became a fairly substantial surplus. Banks were better capitalised and NPLs were realised in an orderly way. Small banks were bought out by strong ones. A large number of PLCs were unable to regularise their financial affairs and were de listed.
Asset values however, have not returned to their pre crisis highs.
In 2005 the last of the crisis measures was removed as the ringgit was taken off the fixed exchange system. But unlike pre-crisis days, it does not appear to be a free float, but a managed float, like the Singapore dollar.
Indonesia
Further information:Reformation (Indonesia)
In June 1997,Indonesia seemed far from crisis. Unlike Thailand, Indonesia had low inflation, a trade surplus of more than $900 million, huge foreign exchange reserves of more than $20 billion, and a good banking sector.
But a large number of Indonesian corporations had been borrowing in U.S. dollars. During preceding years, as therupiah had strengthened respective to the dollar, this practice had worked well for those corporations -- their effective levels of debt and financing costs had decreased as the local currency‘s value rose.
In July, when Thailand floated the baht, Indonesia‘s monetary authorities widened the rupiah trading band from 8% to 12%. The rupiah came under severe attack in August. On14 August1997, the managed floating exchange regime was replaced by a free-floating exchange rate arrangement. The rupiah dropped further. The IMF came forward with a rescue package of $23 billion, but the rupiah was sinking further amid fears over corporate debts, massive selling of rupiah, strong demand for dollars. The rupiah and Jakarta Stock Exchange touched a new historic low in September. Moody‘s eventually downgraded Indonesia‘s long-term debt to junk bond.
Although the rupiah crisis began in July and August, it intensified in November when the effects of that summer devaluation showed up on corporate balance sheets. Companies that had borrowed in dollars had to face the higher costs imposed upon them by the rupiah‘s decline, and many reacted by buying dollars, i.e. selling rupiah, undermining the value of the latter further.
The inflation of the rupiah and the resulting steep hikes in the prices of food staples led to riots throughout the country in which more than 500 people died alone inJakarta. In February 1998, PresidentSuharto sacked the governor of Bank Indonesia, but this proved insufficient. Suharto was forced to resign in mid-1998 andB. J. Habibie became President.
Before the crisis, the exchange rate between therupiah and the dollar was roughly 2000 rupiah to 1 USD. The rate had plunged to over 18000 rupiah to 1 USD at times during the crisis.
Indonesia lost 13.5% of its GDP that year.
Singapore
TheSingaporean economy dipped into a short recession almost purely as a result of contagion. The relatively short duration and milder effects can be credited to active management by the government. For example, theMonetary Authority of Singapore allowed for a gradual 20% depreciation of theSingapore dollar to cushion and guide the economy to a soft landing. The timing of government programmes such as the Interim Upgrading Program and other construction related projects were brought forward. Instead of allowing the labor markets to work, the National Wage Council pre-emptively agreed toCPF (Central Provident Fund, the Singapore‘s mandatory saving and social security plan) cuts to lower labor costs, with limited impact on disposable income and local demand. Unlike inHong Kong, no attempt was made to directly intervene in the capital markets, and the Straits Times index was allowed to drop 60%.
In less than a year, the Singapore economy recovered, and continued on its growth trajectory.
Needless to say, the economic effects, although collectively much milder than in other economies, were, in absolute terms, still very devastating, to those badly affected.
People‘s Republic of China
The Chinese currency,renminbi (RMB), had been pegged to the US dollar at a ratio of 8.3 RMB to the dollar, in 1994. Throughout 1998 there was heavy speculation in theWesternpress that China would soon be forced to devalue its currency to protect the competitiveness of Chinese exports vis-a-vis those of ASEAN nations, whose exports became cheaper relative to China‘s. However, the RMB‘s non-convertibility protected its value from currency speculators, and the decision was made to maintain the peg of the currency, improving the country‘s standing within Asia. The currency peg was partly scrapped in July2005 rising (only) 2.3 % against the dollar, reflecting pressure from the United States.
Unlike investments of many of the Southeast Asian nations, almost all of its foreign investment took the form of factories on the ground rather than securities, which insulated the country from rapidcapital flight. While the PRC was relatively unaffected by the crisis compared to Southeast Asia and Korea, GDP growth slowed sharply in 1998 and 1999, calling attention to structural problems with the PRC economy. In particular, the Asian financial crisis convinced the Chinese government of the need to resolve the issue of non-performing loans within the banking system.
Although most of the deposits in PRC banks are domestic and there was not a run on the banks, there was a fear within the Chinese government that weak banks would cause a future crisis lead to a scenario similar to the fall ofSuharto in which theCommunist Party of China would be overthrown. This led to measures to fix the banks and the industrial enterprises, which were largely complete by 2005.
The United States and Japan
The "Asian flu" also put pressure on theUnited States andJapan. Their economies did not collapse, but they were severely hit.
On27 October1997, theDow Jones industrial plunged 554-points, or 7.2%, amid ongoing worries about the Asian economies. TheNew York Stock Exchange briefly suspended trading. The crisis led to a drop inconsumer and spendingconfidence (seeOctober 27, 1997 mini-crash).
Japan was affected because its economy is prominent in the region. Asian countries usually run atrade deficit with Japan because the latter‘s economy was more than twice the size of the rest of Asia together. The Japanese yen fell to 147 as mass selling began, but Japan was the world‘s largest holder of currency reserves at the time, so it was easily defended, and quickly bounced back. About 40% of Japan‘s exports go to Asia. GDP real growth rate slowed dramatically in 1997, from 5% to 1.6% and even sank into recession in 1998. The Asian financial crisis also led to more bankruptcies in Japan. In addition, with South Korea‘s devalued currency, and China‘s steady gains, many companies complained outright they could not compete.
Consequences in Asia
The crisis had significant macro-level effects, including sharp reductions in values of currencies, stock markets, and other asset prices of several Asian countries. Many businesses collapsed, and as a consequence, millions of people fell below the poverty line in 1997-1998. Indonesia, South Korea and Thailand were the countries most affected by the crisis.
The economic crisis also led to political upheaval, most notably culminating in the resignations ofSuharto in Indonesia and Chavalit Yongchaiyudh in Thailand. There was a general rise in anti-Western sentiment, withGeorge Soros and theInternational Monetary Fund in particular singled out as targets of criticisms. Heavy US investment in Thailand ended...replaced by mostly European investment, though Japanese investment continued. Islamic and separatist movements intensified inIndonesia as the central authority weakened.
More long-term consequences include reversal of the relative gains made in the boom years just preceding the crisis. For example, theCIA World Factbook reports that the per capita income (measured bypurchasing power parity) in Thailand declined from $8,800 to $8,300 between 1997 and2005; in Indonesia it declined from $4,600 to $3,700; in Malaysia it declined from $11,100 to $10,400. Over the same period, world per capita income rose from $6,500 to $9,300[6],[7]. Indeed, the CIA‘s analysis suggests theeconomy of Indonesia was still smaller in 2005 than it had been in 1997 despite a population increase of 30 million, suggesting an impact on that country similar to theGreat Depression.
In Thailand, GDP numbers could not explain the plight of ordinary people, as many thousands of office workers and other middle class were suddenly without plunged into poverty. Drug abuse and prostitution increased, people started moonlighting as taxi drivers and street vendors en masse to make ends meet, and tourists were targeted in violent and desperate scams, thousands abandoned their automobiles, auto production became a third of pre-crisis levels but eventually recovered after many years.
Within East Asia, the bulk of investment and a significant amount of economic weight shifted fromJapan andASEAN toChina.
The crisis has been intensively analyzed by economists for its breadth, speed, and dynamism; it affected dozens of countries, had a direct impact on the livelihood of millions, happened within the course of a mere few months, and at each stage of the crisis leading economists, in particular the international institutions, seemed a step behind. Perhaps more interesting to economists is the speed with which it ended, leaving most of the developed economies unharmed. These curiosities have prompted an explosion of literature aboutfinancial economics and a litany of explanations why the crisis occurred. A number of critiques have been leveled against the conduct of theInternational Monetary Fund in the crisis, including one by formerWorld Bank economistJoseph Stiglitz.
Politically there were some benefits. In several countries, particularlySouth Korea andIndonesia, there was renewed push forcorporate governance. Rampaging inflation weakened the authority of theSuharto regime and lead to its toppling in 1998, acceleratingEast Timor‘s independence.
After the crisis, Korea‘s foriegn currency reserve fell below the sustainable level. Daewoo International suggested an idea of exporting gold to keep the foriegn currency level up to the functionable level. But South Korean government did not hold that much gold. So South Koreans, unlike any other countries in the world and never seen before, traded their own gold with Korean Won to keep the foreign currency reserve to adequate level so that the economy would come to stable level. It gave Koreans sense of unity after loss of morale throughout 90‘s caused by extreme individualism. It showed that, unlike any other countries in the world, Koreans, as homogeneous ethnic group, are more patriotic than any other individuals on the earth. Note that during the campaign, no other ethnic groups (Chinese and others) in Korea participated in it.
Consequences elsewhere
After the Asian crisis, international investors were reluctant to lend to developing countries, leading to economic slowdowns in developing countries in many parts of the world. The powerful negative shock also sharply reduced the price of oil, which reached a low of $8/barrel towards the end of 1998, causing a financial pinch inOPEC nations and other oil exporters.
Such sharply reduced oil revenue in turn contributed to theRussian financial crisis in 1998. Which in turn causedLong-Term Capital Management in the United States to collapse, after losing $4.6 billion in 4 months. A wider collapse in the financial markets was avoided whenAlan Greenspan and theFederal Reserve Bank of New York organized a $3.625 bn bail-out.
Major emerging economies Brazil andArgentina also fell into crisis in the late 1990s (seeArgentine debt crisis).
The crisis in general was part of a global backlash against theWashington Consensus and institutions such as theIMF andWorld Bank, which simultaneously became unpopular in developed countries following the rise of theanti-globalization movement in1999. Four major rounds of world trade talks since the crisis, inSeattle,Doha,Cancun, andHong Kong, have failed to produce a significant agreement as developing countries have become more assertive, and nations are increasingly turning toward regional or bilateralFTAs (Free Trade Agreement) as an alternative to global institutions.
Many nations learned from this, and quickly built up foreign exchange reserves as a hedge against attacks, including Japan, China, South Korea. Pan Asian currency swaps were introduced in the event of another crisis. However, interestingly enough, such nations as Brazil, Russia, and India as well as most of East Asia began copying the Japanese model of weaking their currencies, restructuring their economies so as to create acurrent account surplus to build largeforeign currency reserves. This has led to ever increasing funding for US treasury bonds, allowing or aiding housing (2001-2005) and stock asset bubbles (1996-2000) to develop in the United States.