1. 10 Years After the Asian Crisis, We are Not Out of the Woods Yet - Joseph Stiglitz Sung Youn Park International Finance Professor Jasper Kim

2. July 1997  Thai “Baht” plummeted  Financial Panic in Indonesia and Korea  Crash of Russia’s “Ruble”  Crash of Brazil’s “Real”

3. Asian Currencies

4. Asian Stock Market

5. Asian financial crisis → Global financial crisis 10 years later…  What were the lessons?  Has the world learned them?  Could such a crisis recur?  Is another crisis imminent?  Why is there another financial crisis today?

6. Causes that marked the Asian Financial Crisis  Low risk premiums Rapid Increases in capital flows Increase in short-term borrowing from developed countries to developing countries  Today: subprime mortgage, resurgence of capital flows into the house market Irresponsible lending Today’s “predatory lending” Over optimistic

7.  Lack of Transparency Financial intermediaries were not always free to use business criteria in allocating credit.  Domestic lenders could not monitor adequately the financial condition of their borrowers Financial intermediaries or their owners were not expected to bear the full costs of failure  Today’s Appraisals Unreliable criteria for appraising exposed the shaky foundation of today’s housing market Hand-picked by brokers Unlike lenders, appraisals have short-term interest in loans, since they sell them to investors.

8. Is too much growth/confidence good?  Rapid Asian economic growth disguised the extent of risky lending.  Innovations in information and transactions technologies have linked these countries more closely to world financial markets in the 1990s, thus increasing their vulnerability to changes in market sentiment.  Price rise in the house market disguised the future risk of price fall.  Systemized securitization of risk and over- confidence caused liquidity crisis.

9. Improvements  Hedge funds  Accumulation of foreign currency reserves Cost of reserves vs. Development projects  Reduced foreign borrowing; Recourse to Domestic borrowing Independence Reduce foreign exchange exposure

10. Setbacks to prevention of Financial Crisis  Foreign Reserves Weakening dollar value  US Treasury and IMF Unsupportive of reforms of policy measures to prevent crises and dealing with them Unsupportive of higher transparency The Bush Administration vetoed on restriction of bank secrecy proposed by the Organization for Economic Cooperation and Development

11. Reforms needed  Capital Market Liberalization  Credible International Financial institutions besides the IMF  Over hedge-fund partially caused the current financial crisis