Can Asia Rescue the Global Economy?

Description

During the 1997-98 Asian financial crisis, US financial experts lectured Asians to accept good governance, transparency and free-market outcomes while avoiding drastic government intervention. Asian nations indeed tightened their belts, saving funds and seeking out safe havens for funds, including US Treasury bills. “This inflow of foreign lending conveniently enabled the Bush administration to fund ever-increasing budget deficits resulting from tax cuts and increased expenditure,” explains corporate strategy professor Linda Lim with the University of Michigan. Increased deficit spending in the US, led to excesses in some markets, particularly real estate. As housing prices decline and spending slows, the US confronts the largest banking and credit crisis in 80 years. Lim cautions that businesses can’t look to Asia for quick relief: Asia’s large sovereign wealth funds are wary about reporting requirements and protectionist complaints, and Asian savers won’t change old habits quickly. Lim concludes that the crisis will likely encourage a gradual increase in foreign investment in the US and greater cooperation among nations, along with strong government regulation and new fiscal discipline. – YaleGlobal

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http://yaleglobal.yale.edu/display.article?id=11383

http://yaleglobal.yale.edu/display.article?id=11383