Thread, on the Asia (& Global) crisis.
I have been running a few thoughts over and over again in my mind in the last week or so, prompted by my email conversations with people back in Asia, the posts on this board, and the smorgasboard of articles to date.
Over the weekend, as I was busily putting up the Christmas lights, much to the boss's delight, I sort of develop several thoughts which I'd like your improvement and feedback, if they warrant the merit.
**O/T** Christmas lights.
Yes, this being our 4th Christmas in the US, we have finally succumbed to the Dallas (& US, I think) tradition and decorated the Yeo residence with lights, in a big way. So on Friday night we raided Walmart's in a big way, and filled up the trunk with all manners of lights and decorations (what's a pair of empty nesters left to do but fill up their week-ends thus? :o)) So now our house looks at least half as bright as the neighbours'...
Anyway, back to the crisis. I ws thinking that in the 50s and 60s, the Soviet economic system worked quite well, partly because there was (in their sphere) political and economic stability. Thus the system tended toward a structure optimum for their context. So we saw parts of the Soviet Union being dedicated to wheat, others to cotton, others to oil etc. This worked quite well until the dislocation occurred, and the USSR collapsed. When the end came, it was sudden and cataclysmic, like what we have seen in Asia. People used to a stable life and reasonable living standards were suddenly reduced to poverty and unemployment in huge numbers, with whole regions falling into starvation, or unable to cloth themselves, as the the entire Region economy, based on a strong Centralist model collapsed, as the USSR fell apart.
So what has this got to do with the Asian situation? It is plausible, I thought, that the 15 - 20 years of economic boom in Asia resulted in a Regional economic model which was optimised for those boom years. Thus, the Asian model was based on large scale exports to the First World, but also in the early 90s, intra-Asian trade started to boom. Thus Asian economies started to be intertwined even for basic necessities (eg. Indonesia started to import rice in great quantities, feed for chicken, soya beans, flour etc, because it was cheaper and more efficient to do so). This model worked well while the entire Region was growing, capital was plentiful, and currencies were relatively stable.
Thus, when the cracks widened, and Thailand collapsed, the currency traders were sequentially able to speculate against weak individual Asian currencies, with devastating impact. The Regional model assumed a stable global currency regime, and when this was no longer sustainable, the whole house of cards collapsed. Part of the reason Indonesia is in such dire straits because the price of basic foodstuffs, such as rice, soya bean derivative foods, meat (read stock feed) all shot up in Rupiah terms, as all of these have significant import components.
Is this making sense?
Going forward, if the EU model is successful, as they move to effectively a single currency model, this may be the "favoured" Regional economic model in the new millenium?
Thus, the hypothesis may be, in a global economy, individual country currencies may no longer be sustainable.
If this makes some sense, I am sure many of you will be able to put this in much more correct and succinct terms. Comments?
Best,
Steve Yeo |
