¶ … Asian Financial Crisis. This offers everyone with specific insight about those factors leading up to these events and how they transformed the economy going forward. The combination of them helps to place what happened into perspective. (Das, 1999) The economies of Asia became interconnected from increased amounts of globalization and more trade with developed nations (i.e. The United States, Europe, Canada and Australia). This resulted in these countries experiencing above average rates of economic growth. The problem was that many of the practices of various governments led to excessive amounts of speculation. At the same time, many emerging economies were growing at above average historical rates. This led to attitudes that the region will not experience slowdowns anytime soon. (Das, 1999)

In the summer of 1997, a chain of events occurred. That caused it to go from extreme boom and bust cycles. It started with the Thai baht going through unprecedented declines. This was sparked by fears that the economy was slowing much more than expected which caused a massive selloff. The primary reasons for these events were a sharp decline in the price of semi-conductors. This made it harder for manufacturers to cheaply produce and import their products to developed markets. (Das, 1999)

At first, these concerns were largely ignored. This is because the Chinese remnimbi and the Japanese yen had experienced declines in the early to mid 1990s from both governments devaluing them. A similar effect occurred as semi-conductor prices fell and then eventually recovered. This led to the belief that these events were something short-term that would eventually pass. (Das, 1999)

Moreover, Latin America had experienced similar issues and was able to overcome key challenges unscathed in the 1980s. The result is many traders and investors...

This caused them to take on excessive amounts of risk. These views set the stage for large declines, with no one believing this could happen until it was too late. (Das, 1999)
The situation in Thailand exacerbated these problems by causing the economy to slow much faster than expected. Evidence of this can be seen with insights from Das (1999) who said that Thailand had an effect immediately on: Malaysia, Indonesia, South Korea and Singapore. Once this happened, the economies of China, Japan and Hong Kong were impacted by the slowdown. The result is the situation in Thailand, spread from one country to the next within a matter of three months. Globalization and the liberalization of trade practices increased the scope and pace of the crisis. (Das, 1999)

The main reason why semi-conductor prices were down is because of a decline in demand for consumer electronics between 1995 and 1997. This caused exports from these countries to fall from 21.6% to 4.3%. No one was paying attention to the effect this was having on their economies and the industry. (Das, 1999)

As a result, these attitudes created a situation where several different factors came together at the same time to create the Asian Financial Crisis of 1997. The most notable include: the belief that the economy would not slow based upon previous successes, a vulnerable financial sector and structural flaws in government policies / regulation. These variables created a situation where there was no accountability and made it difficult for central bankers to understand what was happening. (Das, 1999)

The past successes of the economy allowed many people to believe that any kind of effects from the slowdown in semi-conductors was only temporary. This is because these countries were experiencing tremendous…