"Were the Asian economies more vulnerable to financial panic in 1997 than they had been, say, five or ten years before? Yes, surely—but not because of crony capitalism, or indeed what would usually be considered bad government policies. Rather, they had become more vulnerable partly because they had opened up their financial markets—because they had, in fact, become better free-market economies, not worse. And they had also grown vulnerable because they had taken advantage of their new popularity with international lenders to run up substantial debts to the outside world. These debts intensified the feedback from loss of confidence to financial collapse and back again, making the vicious circle of crisis more intense. It wasn’t that the money was badly spent; some of it was, some of it wasn’t. It was that the new debts, unlike the old ones, were in dollars—and that turned out to be the economies’ undoing."
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Academics from the United StatesEssayists from the United StatesColumnists from the United StatesBloggers from the United StatesEconomists from the United States
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Chap. 4 : Asia’s Crash
https://en.wikiquote.org/wiki/Paul_Krugman
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Paul Krugman
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