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The "Asian Financial Crisis", Did Not Solely Affect The Countries Of Asia But Also Had An Impact On Other World Economies Including The United States

2708 words - 11 pages

The "Asian financial crisis", did not solely affect the countries of Asia but also had an impact on other world economies including the United States. This paper will look at the short run effects that occurred on the U.S. Steel Industry as well as predictions of long run effects in the future."Asian financial crisis" started in July 1997, when speculators and Thai residents were trying to sell the baht and buy U.S. dollars, because the fixed exchange rate of the baht were pegged artificially high to the U.S. dollar. This caused the baht out of the country, and the Thai government ran out of foreign exchange reserves. As a result, capital became scarcer, the baht devalued by 20% as measured ...view middle of the document...

Asian stock and real estate were in danger of collapse due to high-inflated prices. The growth expectations in these countries were too high and could not be saved by good long-term investment.The International Monetary Fund (IMF) was established immediately after the Second World War by the governments of many nations for the purpose of achieving financial stability of its member nations. IMF has extended its financial assistance to Asian countries in particular Thailand, Indonesia, and South Korea. The economic conditions of these three countries have actually worsened and did not improve due to the IMF's strict assistance terms. Many government officials in Asia along with some economists look unfavorable upon the conditions attached to the IMF's aid packages which include: high interest rates, tax raises, and public spending cutbacks. Instead of the IMF giving relief to Asian countries they have continued the grief of the "Asian Financial Crisis."The "Asian Financial Crisis" impacted many countries around the world. The hardest hit non-Asian countries were Russia, Eastern Europe, and Latin America, which were weak and depended heavily on the Asian economy for trade and investment. The U.S. economy as a whole has not felt the same devastating effects of the "Asian Financial Crisis" as other countries, but some U.S. industries' exports to Asia have declined sharply since the crisis began.The "Asian Financial Crisis" affected the Western U.S. economies more negatively than any other part of the U.S. due to the relatively large share of exports going to Asia. The Western states with the largest share of exports to Asia include: Washington, Oregon, Arizona, California, and Alaska. The Asian demand for U.S. exports decreased with the falling Asian currencies making their goods more competitive on the world markets therefore putting more pressure on these states. One industry that was impacted by this crisis and will be discussed in detail was the U.S. steel industry.U.S. steel industry has experienced many negative short run effects associated with the "Asian Financial Crisis" that will be felt for a long time. Before the crisis began, Asian countries financed construction of steel manufacturing plants, offices and buildings. These loans from governments and private banks were based on a totally unrealistic view of sustainable growth. With the "Asian Financial Crisis" and the impact of non-performing debt on Asian economies proved to be disastrous. What did this mean for the U.S steel industry? In the short run, the economic decline in Asian countries has caused the need to export to increase because their domestic steel consumption declined. A decrease in Asia's domestic steel consumption caused other foreign steel exporters to expand into other available markets that included the U.S. Since the U.S is the world's most open major steel market, they are a vulnerable target.Another short run problem faced by the U.S. steel industry was the...

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