Pegged Exchange Rate in Asia

Many Asian currencies were pegged to the US dollar.

Events of 1995
The G-7 agreed to appreciate the dollar to Japanese
Yen - made Japanese goods cheaper. - The Asian
Tiger's (Thailand, Taiwan, Singapore, and ) currencies
pegged to the dollar found their currencies also
appreciating to the Yen. The cost of exports went up,
so they were selling less. These export based
societies had an economic slowdown. Investors
started becoming weary.

George Soros
Convinced investors that the thai bhatt was going to
fail. Investors blindly followed his advice and pulled
out of their investments. This swift outflow of funds
put so much pressure on the system that it actually
did fail. Think herd effect.

Thailand
The first country to go. Knew that if they ran out of $
they could not repay debts. Went to IMF, but were
denied help. Next country to fall was Malaysia.

Indonesia
Social and political breakdown. Violent protest riots.
Overthrow of the Suharto regime.

South Korea
Large economy - their downfall would have been
much more impactful. Got a $55 Billion rescue loan
from the IMF.

Russia
For a little while the markets forgot about risk and
investors start investing without thinking too much.
They went for Russia because they thought they were
a stable economy. However, their currency also
defaulted and plummeted during the crisis

United States
Long Term Capital Management (LTCM), a private
hedge fund, was in trouble. They controlled directly
$100 Billion worth of assets and indirectly over a
 trillion dollars (larger than the US economy at the
time). Bailed out by private banks so as to not involve
tax payer money.

Brazil
They preempted the effects and asked for an early
loan package. Gov. cut spending and enacted
reforms. Although they were hit by the crisis, their
problems were able to be contained.

Problems with IMF Policies

Very strict conditions. Often demanded a level of
immediate government interaction, which threw the
countries into a tailspin. Asked them to do too much
at one time, adding fuel to the fire at this point.

New Form Colonialism

The situation created by the IMF. Before countries
colonized by military force. Now all they needed to do
was destabilize their economy enough that they had
to come and ask for a bailout policy. Then you dictate
the policies and eventually effectively colonize them.