Hello John, Our mutual respect and cooperation aside, this just yells for a reply ;o) Nothing personal, of course, but here goes: > > A dollar-peg was the primary cause of the Asian Financial Crisis of 1997, > when the rising dollar value caused first a soaring value of the Thai Bhat, --- the crisis started after Thailand removed the peg! The main issue was really that real estate prices had been sky high, valuations were pure phantasie and every man and his dog borrowed against these phantastic valuations and used the funds to build some more. That - together with an almost criminally negligent banking sector and extensive crossholdings which permitted book cooking of a type ENRON could have a learnt a lesson or five from - and, of course cronyism, send Thailand down the gurgler. However, had the earlier peg stayed in place, then the onslaught against the Thai Baht could have not occured (remember Sorros?) and hence the economy would have cooled off over time, rather than crashing.
> which caused the crash which promptly spread to other ASEAN nations like > Malaysia, Indonesia, and S. Korea. --- South Korea is not a Member of ASEAN, it's about 5,000KM too far to the East to be Southeast Asian. > When the fixed exchange peg finally > crumbled, the Bhat lost 40% of its value, the Korean won and the Philippine > ringgit --- I assume you mean Philippine Pesos and Malaysian Ringgit? > had lost half their value versus the dollar, while the Indonesian > rupiah had lost 70% of its value. --- Actually the Malaysian Ringgit lost less tan 30% and the Philippines were largely unaffected from the Asian crisis. Their currency had been in gradual decline mainly due to mismanagement and lacking trust of the populace in the weak governments of the day. The continuing decline of the Philippine economy began speeding up again just as other ASEAN members emerged from the crisis. The Indonesian devastation was cause by something entirely different, namely the 'induced' fall of Soeharto. Another of the great screw-ups the CIA can add to it's long list of meddling in foreign nations' affairs back-firing. With people on the street, race riots, wide spread looting and Chinese money leaving the country by the container load, the economy came to a virtual stand still. Ahhh, the ugly face of untrained democracy... It led to a lot of economic devastation in > those countries. I wrote a term paper at the time on the causes of the Asian > Financial Crisis. --- Sorry, John, writing a term paper doesn't make it right. I wrote a few commentaries for a Stategic Economic Thinktank during the time and they even paid me for it. > Imposing a dollar peg during the crisis might have worked for Malaysia, but > only because they had a floating exchange rate up to that point so they had > avoided the situation of their neighbors. And if Malaysia's currency had > come under pressure, the central bank can only hold up the peg until they > run out of foreign reserves, which is what happened with their neighbors. --- their neighbours had no peg. Singapore never really covered from the shock and regrets that their government did follow IMF recommendations. The only reason they managed to tag along is the fact that they are a city state, highly developped with a splendid work force and because at the time the dot-com boom was heating up demanding 3-shift productions of computer components, until recently he main-stay of the Singaporean economy. There is something to throw in as fundamental principle here. Malaysia's peg worked for two simple reasons: The country against whose currency the Ringgit is pegged is the largest trading partner of Malaysia and also the single largest source of foreign direct investment! Meaning, it would have been impossible to attack the Ringgit using USD because the national bank could at all times have defended any attack by simply raising interest on dollar denominated accounts. This in turn would have hit the foreign companys and banks with facilities in Malaysia where it would have hurt them the most. And make no mistake, a wafer plant or chip manufacture can't just 'leave'. It takes 18 months to build a wafer plant, 6 months to get the installations running and another 3 months to start churning out wafers for chip sets. If you then consider that Malaysia has had the option to make American corporations and consumers pay for the defence of the Ringgit in an attack but instead opted for a peg, then you might actually start to wonder about the incredible forsight of the people who decided on the peg. Had the Ringgit floated, then the tech boom would have never reached the heights it did, simply because the equipment costs would have been much, much higher. Of course, realizing this in hindsight, is easy. But the praise belongs to the guys who anticipated it. The Dollar peg gave American corporations in Malaysia the garantee of fixed production costs on a dollar basis for the past five years. Without that things would look very differently nowadays. > > A fixed exchange rate, while it has some benefits, is overall not a good > idea long term, especially for developing countries. --- I agree on the condition that you add the word MOST before your word 'developing'. As I said in my post, things are different for 'some' countries. > The idea of a > government, and not the market, setting interest rates, exchange rates, and > money supply is folly. --- I wholeheartedly disagree from the perspective I'm in. The idea of a government that is only interested in reelection setting exchange rates, is insane, for sure. But letting a government that has a track record of economic genius decide (and that has been reelected in actual democratic and foreign-monitored elections for a whopping 22 years) what might be best for the country, heck yeah, let them do it. After all, living standarts in Malaysia are second only to Singapore in the region and Singapore (government reelected for 18 years running) is a city state, so the comparisson is slightly biased. > It may have some short term benefits at first, but > over time will lead to bad consequences on balance worse than if the free > market had been allowed to function all along. --- That is what I believed when they put the peg in place. Then I checked the place out, dug into statistics, talked to people - and decided that this was the place to move my headquarters to. Malaysia might well be the one example that puts all our economic fundamentals and theories in question. As I said, I shared your believes untill day to day live taught me better. Most of those who differ from my this point of view loacally seem to be simply reciting the biased reports they read in the press. It's amazing how often respectable publications like BusinessWeek get it so wrong when they report about Malaysia - but it's not that surprising once one finds out that their reporters often never set foot outside the capital... So, to sum up, Malaysia does have it's woes and wants, but overall, it's the best place for the types of businesses I'm in. Hey, I did vote with my feet, uprooted three established ventures, sold a business and moved here, turning down lucrative job offers from the US, Eire, Germany, Australia, etc. in the process. And I haven't regretted it. The only other country that has a 'livable' tag in my book is Panama. In case you are wondering, to get a livable tag a country has to have an unusually good match of infrastructre, cost of living, cost of doing business, taxation, personal freedoms, mentality of populace, availability of work-force, etc. Most Western countries fail in about half, most developing countries in the other half. Malaysia and Panama both passed, albeit in slightly different fields at about 85-90%, the highest marks I have ever given :o) Cheers, Robert. budget & privacy website hosting http://www.cyberica.net budget & privacy domain registrations + mail http://www.u2planet.com/cfdomaintrust.html --- You are currently subscribed to e-gold-list as: [EMAIL PROTECTED] To unsubscribe send a blank email to [EMAIL PROTECTED] Use e-gold's Secure Randomized Keyboard (SRK) when accessing your e-gold account(s) via the web and shopping cart interfaces to help thwart keystroke loggers and common viruses.
