Financial crisis of the past

If we look into history of different countries we will find that different countries faced the financial crises at different times. As the world is facing now financial crisis now also, the question comes in mind that who are those who run this finance horse, what are the reasons which leads to financial crises? Or is there is someone who is holding all the strings and keep them pulling? So many questions come in mind when mind starts thinking about it.crisis-recession-global-financial. Well I had searched about this and compiled these ten nasty crises. Check out these ten dramatic crises 

Asian Financial Crisis (1997 – 1999)

South East Asia was a hot international investment destination during 1997-1999. The high short-term interest rates of ASEAN countries given foreign investors favorable rates that made the fluent capital flow of in the region. 

In the early 1990sthe growth rates were so high as 12% of GDP, and assets prices were increased also, leading analysts refers it as a remarkable thing as “Asian Tigers” and “Asian Economic Miracle”. 

In meantime Thailand, South Korea and Indonesia were having huge deficits for that these countries borrowed quite a bit of money externally keeping their own interest rates fixed which at end lead them to damage in foreign markets. 

In early 1990s foreign investors turned out from Asia as higher U.S, interest rates made dollar value high, this affected South East Asia’s exports as their currencies were pegged with the U.S. dollar, so in result they lost their exports competitiveness. By the beginning of 1996 South East Asian exports were slowed down, at least it was fueled by China’s increased competitiveness in the export market. 

What were the causes of that crisis? Some say that it was because of the policies leading to large amounts of credit pushing up asset prices which collapsed then which lead to a massive debt defaults (kind of like the sub prime crisis). 

The foreign investors got the infectious fear so they pulled out their investments. To hold the region attractive for foreign investors ASEAN governments pulled up their interest rates and bought up excess domestic money using foreign reserves. Which lead the government’s central banks run short of foreign reserves and on other hand capital was still flying out from the region. 

Thailand’s government floated the bath in 1997 to engage the Asian Financial Crisis. Regional currencies depreciated making liabilities in terms of foreign currency more expensive in domestic terms. It melted down the whole economic sectors and people felt into poverty. Stock markets crashed down and currencies devalued. That led to the political destabilization with so many executive resignations and increase in extremist groups. 

The International Monetary Fund made bailout packages stating removal of faults in exchange for debt defaults. In these reforms government expenses were cut down, allowing banks to fail, raising interest rates and becoming more transparent. 

So far the results of the IMF’s actions are doubtful for reaction against powerful international NGOs that continues today. According to some analysts Asian crisis had also contributed to the recent United States housing bubble. 

Lesson 

In crisis if rich people interfere offering their money in exchange for an agenda that not for sure always their agenda will work or will be having any useful results. Financial meltdowns can happen with blink of an eye.