Mohan:
So how far will Yahoo go?
BTW, I feel the wounded Asian tigers will retaliate by:
(i) exporting as much as they can using all the capacity they have created,
(ii) importing very little, managing with imports from each other,
(iii) demanding higher wages from their American/European employers to compensate for the cost of a basket of imported and locally produced goods, and
(iv) repaying the IMF loans by even fasting (remember India did not draw the full ammount from WB when she had a similar crisis).
At the end, these wouned tigers will emerge as powerful, but somewhat reduced in stature.
Most importantly, though, by the time they emerge from the crisis, US will have shrunk itself considerably because the mirage of "incremental growth" will no longer come from US exports to Asia. Although, the tolal US exports could reduce by (say) a third of 15% exported to Asia, the "inflated notion" of continued exponential growth will vanish.
This is strictly my reading of the situation, taking into account the Asian culture of consuming less, borrowing less (?), etc. The whole area was (IMO) not matured enough in the mores of financial management and the free flow of funds from abroad made them more ignorant of the crisis that is attached (though with small probability) to a highly leveraged economy. Of course, the event of a crisis has already occurred; thus that the ex ante probability of a crisis occurring being small is irrelevant conditional on the event.
Sankar |
