asian
...llion worth of bad debts and a corrupt and inefficient government. Thailand and Indonesia also suffer from being overbuilt during real estate booms that Reven2 were the result of huge influxes of cash by optimistic foreign investors. South Korea faltered under the weight of its huge foreign debt, decreasing exports, and weakening currency (Lochhead 4-5). Other major countries touched by the crisis are Japan, China, Malaysia, and the Philippines. Japan’s economy is burdened by $300 billion in bad bank loans and a recession. Chinese banks may carry bad banks loans of up to $1 trillion. The banks lend 66% of China’s investment capital to state-run industries that only produce 12% of China’s industrial output (Manning 2). Malaysia and the Philippines are both faced with devalued currencies and lowered stock markets (Lochhead 5). The implications of the Asian financial crisis are many. A declining Asian economy will reduce demand for U.S. and other countries’ exports. The devalued currencies of East Asia will make Asian imports seen cheap and will lead to increased American impor ts, thus increasing our trade deficit (Lochhead 2). A worldwide banking emergency could result if the embattled Asian economies failed to pay back their loans to the U.S. and other countries (Duffy 2). If the Asian economies fall further, in a desire to r aise cash, they might sell the hundreds of billion dollars of U.S. treasuries they now own, leading to higher interest rates and an American recession (Lacayo 2). An article in the Economist reported that the Asian economic turmoil and the layoffs that may result, could instigate increased discontent and possibly give rise to violent strikes, riots, and greater political instability (1-2). Reven 3 Since the financial tumult causes instability in the world market, several solutions have been proposed designed to restore the health of the Asian economy. The International Monetary Fund is offering $60 billion in aid packages to Thailand, Indonesia, a nd South Korea (Lacayo 1). The aid will be used for converting short-term debt to long-term debt and to keep currencies from falling lower in the world market (Passell 2). Lower...