As the U.S. seems to be reaching consensus on the next stage in addressing its financial crisis I thought about another financial crisis ten to eleven years ago. The Asian financial crisis of 1997-1998 had somewhat similar causes and symptoms as the current American crisis. The main difference was the role of dollar denominated foreign loans which suddenly became much harder to repay after currencies such as the Thai Baht were devalued. The IMF response, which was much criticized at the time, was diametrically opposed to the U.S. response to its own crisis that we are seeing develop now. The IMF urged governments to cut budgets, raise interest rates, let banks fail, privatize state companies and to introduce a host of other structural reform and austerity measures that at best were irrelevant and at worst exacerbated the crisis. As a result Indonesia's GDP fell 13.5% in 1998 and deep recessions occurred in all the most affected countries.
At the time I really couldn't understand the IMF's response. It seemed that they were simply applying the same policies that they had applied, to hyperinflation in Latin America to a totally different situation. It seemed to me they only had one set of tricks they knew.
Looking at the U.S. (appropriately) doing the exact opposite of what the IMF prescribed in the Asian crisis, I don't know if we should be more angry or amused.
1 comment:
Hi Moom,
I reckoned amuzed would be better because these guys have no reason to change their tack. They are completely blind to the fact that they're living a lie and with everything to lose , why would they change.
Best to stay amused and then you can think straight and have some enjoyment through what will likely be a difficult time economically for all of us.
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