Deja Vu all over again

I'm reading a book by Allen Greenspan and he talks about events that led to the so-called Asian contagion, a series of financial crises that began with the collapse of the Thai baht (unit of currency) and Malaysian ringgit (unit of currency) in the summer of 1997 and grew into a threat to the world economy. Almost immediately, Thailand and Malaysia plunged into recession. The economies of Hong Kong, the Philippines, and Singapore were all hit hard. In Indonesia the rupiah (unit of currency) imploded, the stock market collapsed and the ensuing economic disarray led to food riots, widespread misery, and eventually the fall of President Suharto.

 

As it did during Mexico's crisis two years before the International Monetary Fund moved in with financial support. Alan Greenspan got involved when a senior official at the Bank of Japan called to warn that South Korea would be the next to go. The official used the term "the dam is bursting" to explain that Japanese banks had lost confidence in Korea and were about to stop renewing tens of billions of dollars in loans.

 

The various countries not calling in their loans, the International Monetary Fund making loans etc rescued the troubled economies. There are a lot more in the book but one thing Greenspan wrote I thought you might find interesting.

 

Alan Greenspan mentions:

 

There was always the chance that a rescue this large would set a bad precedent: how many more times would investors pour money into willing but shaky economies, figuring that if they got into big enough trouble, the IMF would bail them out? This was a version of what the insurance industry calls the "moral hazard" of protecting individuals from risk. The bigger the safety net, the theory goes, the greater the recklessness with which people, businesses, or governments will tend to behave.

 

Sound familiar?  Profits are privatized and losses are nationalized.

Regards,
John Jenkins

865-803-8179 cell

Gatlinburg, TN
Email: jrjenki@yahoo.com 

Website: http://www.greenbriersolutions.com 
Blog: http://littlepigeon.blogspot.com/

Fibonacci: It's as easy as 1,2,3.