Discussion based on the east asia crisis Assignment

Discussion based on the east asia crisis - assigning ExampleThe international monetary fund (IMF) and world bank had not surveyed the abundant achievements of the area. According to Stilgitz, this may have resulted due to the East Asia rejections to follow western policies such as the Washington consensus so as to attain success (Stiglitz 89-99).Stiglitz discusses two patterns. The devaluation of the nations currency which occurred frequently all over the area. If a merchant believes a currency will devaluate they sell their stocks of that capital, this leads currency to devalue since the supply of money rises while demand does not. The government also spends its foreign currency reserves to pile up its confess currency until it gets exhausted of the reserves, either way the currency falls in value. This case was mainly in Thailand(Stiglitz 99-111).The second pattern was realized after the end of the Korean War. The country reformed its economy by tightly controlling its financia l markets. After much pressure from the United States it reluctantly allowed its firm to suck up from aboard, this borrowing from the abroad exposed themselves to the vagaries of the international market. The Withdrawal of the World Bank from lending it bring ond its downfall in the economy (Stiglitz 99-111).IMF had a role of lending the money to the East Asia countries. But it did it at a higher(prenominal) interest rate, cutbacks in government spending and increase in taxes. Other additional conditions a county was mandated to run increase in openness and transparency and improve in the financial market as head as minor reforms such as abolition of the clove monopoly in Indonesia.Moreover, the idea of the capital cypher liberation without evidence that such policies promote growth was the one of most important factor to the cause of the crisis. This made the developing nations subject to both rational and irrational whims of the investor community.The Beggar-thyself