The beginning of an exchange rate-induced crisis in what was a tiger economy A shocking tragedy befalls the Kingdom of Thailand as the state proceeded to float its currency following its perceived inability to sustain its peg to the greenback. A series of speculative attacks amounted to a sharp depreciation of the Thai baht, sending ripples across interlinked financial systems in the Asia-Pacific region. Notably, huge current account deficits, growing real estate asset bubbles, lax regulations in the financial sector, and dwindling foreign exchange reserves diminished investor confidence in the currency and the economic strength of the country. Inevitably, compounded with rumours of a currency devaluation, speculative attacks largely undermined the Bank of Thailand’s ability to defend the baht, ultimately floating the currency.
We’ll be looking at the current Global Financial Crisis – How it started and got out of hand and the current situation December 1st, 1998 Once a regional crisis limited to Asia, the current financial crisis has spread across the world like an infectious plague, like a wildfire ravaging a rainforest. And citizens around the world have all been asking the same question – why isn’t anyone doing anything about it? The inaction or sometimes “mis-action” of countries has led to the financial state in countries such as Thailand and Myanmar to worsen, with Thailand’s economy in complete disarray, with the unemployment rate climbing as high as 9%. Some Thai youth have, unbelievably, offered to work as janitors in the Royal Palace to secure employment for themselves. In nearby Myanmar, its desperate pleas for IMF intervention in its oil crisis were initially heeded, despite infighting and squabbles over technicalities punctuating the negotiat...
Trade conditions worsen, exporters panic while domestic producers celebrate With the further depreciation of the Thai baht, Thailand’s quantity demanded for imports has declined due to a diminishing external value of the Baht (and hence more expensive foreign goods for Thai locals). This has led to a fall in export demand for trade partners like Japan and Indonesia, with this impact being the worst in South Korea. In the past month, South Korean exports of electronics, manufacturing materials, and even basic construction materials like wood and cement have declined by 10.2% as these export-oriented industries see their long-term profitability being threatened. Smaller enterprises have been pushed to the brink of insolvency, with a few companies barely breaking even. Thai manufacturers are ecstatic about such uncompetitive markets, however the general consumer does seem to think differently. Prices are slowly rising as well, with the...
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