An event that began in the summer of 1997, with the decision of the Thailand government to allow the value of the Thai baht to float. It then promptly plummeted, causing a region-wide financial crisis that shook markets as far as the New York Stock Exchange.

Among the countries most affected by the financial crisis was Indonesia (leading to the removal of the dictator Suharto), Thailand and Korea.

There have been many explanations for the cause of the crisis, and they include:

  • Overspeculation of Asian currencies and the lack of government capital controls to stop it
  • Over-extension of lending credit by banks (similar to the Great Depression
  • Official corruption
  • Nepotism and favoritism in many Southeast Asian governments
  • Lack of democracy and expression of popular opinion
  • Shaky basis of economic development

    The long term result of the crisis was that the myth of the economic invincibility of the Asian Tigers was forever shattered. Capitalism regained its position as the dominant economic thought in the world. The Asian model (which focused on state direction and government-directed development) was discredited.

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