10 - What I Learned at the World Economic Crisis

10 - What I Learned at the World Economic Crisis -...

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What I Learned at the World Economic Crisis By Joseph Stiglitz o In the early 1990s, East Asian countries had liberalized their financial and capital  markets because of international pressure, including some from the U.S. Treasury  Department o These changed provoked a flood of short-term capital (which looks for the highest  short-term return) o In Thailand, this short-term capital helped fuel an unsustainable real estate boom o Just as suddenly as capital flowed in, it flowed out An when everybody tries to pull their money out at the same time, it causes  an economic problem  o In 1997, when this happened in Thailand, the IMF imposed the same demands that  it once had when this situation had occurred in Latin America Fiscal austerity and tighter monetary policies were believed to restore  confidence in the Thai economy o As the crisis spread to other East Asian nations, and even as evidence of the  policy’s failure mounted, the IMF barely blinked, delivering the same medicine to  each ailing nation that showed upon its doorstep o In Thailand, the government was running such large surpluses that it was actually  starving the economy of much needed investments in education and infrastructure  (which are both essential to economic growth) Stiglitz feared that high interest rates might devastate highly indebted East  Asian firms, causing more bankruptcies and defaults
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10 - What I Learned at the World Economic Crisis -...

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