Description

The United States has been experiencing an exceptional period of
expansion while much of the rest of the world has been recovering
from a series of tumultuous financial crises that began just over two
years ago. In July 1997, under pressure from huge outflows of
foreign currency, Thailand was forced to float its exchange rate and
allow the baht to tumble rapidly against the dollar. The devaluation
of the baht placed other Asian currencies under similar pressure. By
the end of 1997 the “Asian financial crisis” had spread to South
Korea, Malaysia, Indonesia, and other neighboring countries.
Subsequent uncertainty in global financial markets contributed to the
Russian debt default in August 1998 and, more recently, the
Brazilian devaluation in January 1999. The immediate effect on the
crisis countries was high interest rates and serious recession.
However, the crisis was not contained in a few countries. Rather,
the problems flowed outside their borders and washed up on
the shores of the United States.