Financial crisis, also known as financial crisis, refers to all or most of the financial indicators (such as: short-term interest rates, monetary assets, securities, real estate, land (prices), business) in a country or several countries and regions. The sharp, short-term and super-cyclical deterioration of the number of bankruptcies and the number of bankruptcies of financial institutions.

It is characterized by a large depreciation of currency values ??throughout the region based on people's expectations that the economy will be more pessimistic in the future. The total economic volume and economic scale have suffered significant losses, and economic growth has been hit. It is often accompanied by a large number of business closures, increased unemployment, general economic depression in society, and sometimes even social unrest or national political unrest.

Financial crises can be divided into currency crises, debt crises, banking crises and other types. Financial crises in recent years have increasingly taken on some form of hybrid crisis.

Thailand’s financial crisis occurred due to turmoil in the stock market and foreign exchange market. First of all, the impact of the US dollar contraction in the foreign exchange market caused the Thai baht to depreciate significantly in a short period of time, further affecting Thailand's stock market and financial system. The financial market in Southeast Asia is a bundled economy where everyone prospers and everyone loses, and the economies of various countries The currency is not unified, and the US dollar eventually becomes the trading unit in the international financial market. Indirectly, it created a driving force for the outbreak of the financial crisis.

Therefore, the outbreak of the financial crisis in Southeast Asia came from the impact of the foreign exchange market, and the currency crisis became a subsidiary of the financial crisis.

Asian Financial Crisis

Overview of the 1997 Asian Financial Crisis

In June 1997, a financial crisis broke out in Asia. The development process of this crisis was very complicated. complex. By the end of 1998, it can be roughly divided into three stages: June to December 1997; January to July 1998; and July to the end of 1998.

The first stage: On July 2, 1997, Thailand announced that it would abandon the fixed exchange rate system and implement a floating exchange rate system, triggering a financial turmoil throughout Southeast Asia. On that day, the exchange rate of the Thai baht against the US dollar fell by 17%, and the foreign exchange and other financial markets were in chaos. Affected by the fluctuation of the Thai baht, the Philippine peso, Indonesian rupiah, and Malaysian ringgit have become the targets of international speculators. In August, Malaysia gave up efforts to defend the ringgit. The Singapore dollar, which has always been strong, also took a hit. Although Indonesia was the last country to be "infected", it has been hit hardest. In late October, international speculators moved to Hong Kong, the international financial center, targeting Hong Kong's linked exchange rate system. The Taiwan authorities suddenly abandoned the exchange rate of the New Taiwan dollar, which depreciated by 3.46% in one day, increasing pressure on the Hong Kong dollar and the Hong Kong stock market. On October 23, Hong Kong’s Hang Seng Index fell sharply by 1,211.47 points; on the 28th, it fell by 1,621.80 points, falling below the 9,000-point mark. Faced with the fierce attack by international financial speculators, the Hong Kong SAR government reiterated that it would not change the current exchange rate system, and the Hang Seng Index rose to reach the 10,000-point mark again. Then, in mid-November, a financial crisis also broke out in South Korea in East Asia. On the 17th, the exchange rate of the Korean won against the U.S. dollar fell to a record high of 1,008:1. On the 21st, the Korean government had to seek help from the International Monetary Fund, temporarily controlling the crisis. . But on December 13, the exchange rate of South Korean won against the US dollar dropped to 1,737.60:1. The Korean won crisis has also impacted the Japanese financial industry, which has large investments in South Korea. In the second half of 1997, a series of Japanese banks and securities companies went bankrupt. As a result, the Southeast Asian financial turmoil evolved into the Asian financial crisis.

The second stage: In early 1998, the financial crisis recurred in Indonesia. Faced with the worst economic recession in history, the prescriptions prescribed by the International Monetary Fund for Indonesia failed to achieve the expected results. On February 11, the Indonesian government announced that it would implement a linked exchange rate system in which the Indonesian rupiah maintains a fixed exchange rate with the US dollar to stabilize the Indonesian rupiah. This move was unanimously opposed by the International Monetary Fund, the United States, and Western Europe. The International Monetary Fund threatened to withdraw aid to Indonesia. Indonesia is in a major political and economic crisis. On February 16, the price of the Indonesian rupiah against the U.S. dollar fell below 10,000:1. Affected by this, the Southeast Asian foreign exchange market experienced another turbulence, with the Singapore dollar, Malaysian ringgit, Thai baht, Philippine peso, etc. falling one after another. It was not until Indonesia and the International Monetary Fund reached an agreement on a new economic reform plan on April 8 that the Southeast Asian currency market was temporarily calm. The Southeast Asian financial crisis that broke out in 1997 put the Japanese economy, which was closely related to it, into trouble. The Japanese yen exchange rate fell from 115 yen to 1 U.S. dollar at the end of June 1997 to 133 yen to 1 U.S. dollar in early April 1998; in May and June, the yen exchange rate continued to fall, once approaching 150 yen to 1 U.S. dollar. pass. With the sharp depreciation of the Japanese yen, the international financial situation has become more uncertain, and the Asian financial crisis continues to deepen.

The third stage: In early August 1998, when the U.S. stock market was in turmoil and the Japanese yen exchange rate continued to fall, international speculators launched a new round of attack on Hong Kong. The Hang Seng Index has fallen to more than 6,600 points during the financial crisis. The Hong Kong SAR government responded by using the Exchange Fund to enter the stock and futures markets, absorbing the Hong Kong dollars sold by international speculators, and stabilizing the foreign exchange market at HK$7.75 per US dollar. After nearly a month of hard work, international speculators have suffered heavy losses and cannot once again realize their attempt to use Hong Kong as a "super cash machine." While international speculators failed in Hong Kong, they also suffered a disastrous defeat in Russia.

On August 17, the Russian Central Bank announced that it would expand the floating range of the ruble-dollar exchange rate to 6.0-9.5:1 during the year, postpone the repayment of foreign debts, and suspend government bond transactions. On September 2, the ruble devalued by 70%. This caused the Russian stock market and foreign exchange market to plummet, triggering a financial crisis and even an economic and political crisis. The sudden change in Russia's policy has devastated international speculators who invested huge sums of money in the Russian stock market, and triggered overall violent fluctuations in the foreign exchange markets of U.S. and European stock markets. If the Asian financial crisis was still regional before then, the outbreak of the Russian financial crisis shows that the Asian financial crisis has gone beyond the regional scope and has global significance. By the end of 1998, the Russian economy was still not out of trouble. In 1999, the financial crisis ended.

The outbreak of the financial crisis in 1997 was caused by many factors. Chinese scholars generally believe that it can be divided into direct triggering factors, internal basic factors and world economic factors.

Direct triggering factors include:

(1) The impact of hot money on the international financial market. There are currently approximately US$7 trillion in liquid international capital worldwide. Once international speculators find out which country or region is profitable, they will immediately impact the currency of that country or region through speculation in order to obtain huge profits in the short term.

(2) Some Asian countries have inappropriate foreign exchange policies. In order to attract foreign investment, they maintained fixed exchange rates and expanded financial liberalization, providing opportunities for international speculators. For example, Thailand abolished controls on the capital market in 1992 before the country's financial system could be straightened out, allowing the flow of short-term funds to flow unimpeded and providing conditions for foreign speculators to speculate on the Thai baht.

(3) In order to maintain a fixed exchange rate system, these countries have used foreign exchange reserves to make up for the deficit for a long time, leading to an increase in foreign debt.

(4) The foreign debt structure of these countries is unreasonable. In the case of large medium-term and short-term debts, once foreign capital outflows exceed foreign capital inflows and the country's foreign exchange reserves are not enough to make up for the shortfall, the country's currency depreciation is inevitable.

Internal fundamental factors include:

(1) High overdraft economic growth and the expansion of non-performing assets. Maintaining a high economic growth rate is the common aspiration of developing countries. When conditions for rapid growth become insufficient, these countries turn to borrowing foreign debt to maintain economic growth in order to continue maintaining the pace. However, due to poor economic development, by the mid-1990s, some Asian countries no longer had the ability to repay their debts. In Southeast Asian countries, the real estate bubble only resulted in bad debts and bad debts from bank loans; as for South Korea, because it is too easy for large companies to obtain funds from banks, once the company is in poor condition, non-performing assets immediately expand. The large number of non-performing assets has in turn affected investor confidence.

(2) The market system is immature. One is that the government has excessively intervened in resource allocation, especially in loan investments and projects in the financial system; the other is that the financial system, especially the regulatory system, is imperfect.

(3) Defects of the “export substitution” model. The "export substitution" model is an important reason for the economic success of many Asian countries. However, this model also has three shortcomings: first, when the economy develops to a certain stage, production costs will increase and exports will be suppressed, causing imbalances in the international balance of payments of these countries; second, when this export-oriented strategy When it becomes the development strategy of many countries, it will cause mutual squeeze between them; third, the stepwise progress of products is a necessary condition for continuing to implement export substitution. It is impossible to maintain competitiveness only by relying on the cheap advantage of resources. After achieving rapid growth, these Asian countries have not solved the above problems.

World economic factors mainly include:

(1) The negative impact of economic globalization. Economic globalization has brought closer and closer economic connections around the world, but the negative impacts resulting from it cannot be ignored, such as the intensification of interest conflicts between nation-states, the enhancement of capital mobility, and the increased difficulty in preventing crises.

(2) Unreasonable international division of labor, trade and currency systems are detrimental to third world countries. In the field of production, developed countries still produce high-tech products and high-tech products themselves, while the technical content of products gradually decreases towards less developed and underdeveloped countries. The least developed countries can only do assembly work and produce primary products. In the field of exchange, developed countries can purchase primary products at low prices and monopolize high prices to sell their own products. In the field of international finance and currency, the entire global financial system and institutions are also beneficial to financial powers.

The impact of this financial crisis is extremely far-reaching. It has exposed some deep-seated problems behind the rapid economic development of some Asian countries. In this sense, it is not only a bad thing, but also a good thing. It provides an opportunity to promote Asian developing countries to deepen reforms, adjust industrial structures, and improve macro management. Since the tasks of reform and adjustment are very arduous, it will take some time for the economies of these countries to fully recover. However, the basic factors for the economic growth of developing countries in Asia still exist. By overcoming internal and external difficulties, there is great hope for the improvement and further development of Asia's economic situation.

The Asian financial crisis that occurred in 1997 and 1998 was another major event that had a profound impact on the world economy after the world economic crisis in the 1930s.

This financial crisis reflects the serious flaws in the financial systems of the world and various countries, including many relatively mature financial systems and economic operating methods that are considered to have been selected through historical development. Many of them have been exposed in this financial crisis. issues require reflection. This financial crisis has raised many new topics for us and raised the issue of establishing new financial rules and organizational forms. This book attempts to conduct research in this area. The central issue of this book's research is how to get rid of the centuries-old problems brought about by the currency supply system formed by various countries under the non-convertible paper money standard after the monetary system reform at the beginning of this century and the debt derivative mechanism formed between enterprises under the new situation. These include:

(1) Corporate debt burdens, bank bad debts, frequent financial and debt crises;

(2) Excessive money supply in society, excessive banking business

(3) Government taxation difficulties, fiscal crisis and financial crisis are mixed;

(4) Inflation entangles the social economy, and the bubble economy Frequent economic fluctuations have occurred, and economic growth has often been hindered;

(5) Insufficient funds of enterprises have brought about operational difficulties, increased bankruptcy and closure rates, and frequent mergers and acquisitions have reduced the stability of enterprises and increased Unemployment is detrimental to economic growth and social stability.

(6) Unequal international monetary relations have put a heavy burden on most countries in the world and caused many international economic problems.

The deepest reasons for the above problems are the imperfection of the monetary system and the lack of full understanding of the new mechanisms arising from transaction activities between enterprises under the conditions of socialized mass production. The idea of ????this book is to establish an authoritative intermediary system for enterprise transaction settlement - the national enterprise transaction intermediary settlement system, to free the debt chain between enterprises, and to eliminate the basis for bad debts between enterprises and banks to avoid debt and financial crises. occurrence, reduce the harm of inflation and bubble economy, and promote stable economic growth. In this innovation process, there will also be innovations in national taxation and fiscal expenditure methods, reducing the occurrence of fiscal deficits. At the same time, it will also produce innovations in corporate systems, reduce corporate bankruptcy and mergers, and enhance corporate stability. In addition, international settlement methods will be innovated and the use of international currencies will be reformed. This process is not a simple governance of economic issues, but a correction of serious defects in the paper currency system, an innovation in the currency supply and circulation system, and a major change in the financial system. Moreover, this change brings about economic operation. Adjustments to many aspects of the mechanism.

The outbreak of the Asian financial crisis has its own specific internal factors in various countries: continued economic overheating, inflated economic bubbles, blindness in introducing foreign capital-excessive short-term foreign debt, imperfect banking systems, banks and enterprises The crisis also has its external causes: the "evil" behavior of international speculators, such as collusion and large amounts of corporate debt. However, people should further investigate the source and find the essential factors that generate the crisis - the trend of modern financial economy and economic globalization.

Liu Shibai believes that financial crisis is an inherent part of capitalist economic crisis. The world economic panic from 1929 to 1933 was preceded by a severe financial crisis. The Mexican financial crisis in 1994 and the East Asian financial crisis in 1997 first occurred in the capitalist world. It can be seen that the financial crisis has its institutional roots and is a crisis of capitalism. The possibility of financial crisis exists in the spontaneous monetary and credit mechanism inherent in the market economy. Once financial activities are out of control and contradictions in currency and capital lending intensify, financial crises will manifest. The modern market economy, characterized by highly developed financial activities, is itself a high-risk economy, containing the possibility of financial crises. Economic globalization and economic integration are another major feature of the contemporary world economy. Economic globalization is the highest form of transnational development of market economy. After the Second World War, with the further development of commodity relations between countries, countries have become more interdependent economically, and there has been a frequent international flow of goods, services, capital, technology, and knowledge.

The trend of economic globalization Be more explicit. The globalization of financial activities is an important reason for the new allocation of contemporary resources in the world and the leapfrog development of economically backward countries and regions. However, the explosive development of international credit and investment has deepened its inherent contradictions, and financial crises will inevitably occur in those countries with imperfect systems. , the weakest link explodes. To sum up, the modern market economy not only has crises caused by overproduction of commodities and insufficient demand, but also financial crises caused by out-of-control financial credit behavior, excessive use of new financial instruments, and excessive speculation in the capital market. In the capitalist world, this crisis in the market operating mechanism is catalyzed and intensified by the basic system. Financial crises are not only inevitable in capitalist countries, but may also occur in socialist market economic systems.

The imperfection of the financial system and the out-of-control financial activities are endogenous factors of the financial crisis. Because of this, in the current structural transformation of our country, people should attach great importance to and effectively build a market economic system regulated by the government. In particular, great efforts should be made to improve the financial system and vigorously strengthen the response to endogenous and exogenous financial crises. prevention capabilities.

Summary: After the outbreak of the Southeast Asian financial crisis, people conducted extensive and in-depth discussions on the causes of the crisis. Pointing out the internal and external causes of the crisis, Liu Shibai further pointed out the underlying reasons, that is, the modern monetary credit mechanism led to the crisis. of the outbreak. As long as the modern market economy exists, the currency and credit mechanism inherent in the market economy may lead to financial crises. However, it only happens in the weakest countries with imperfect systems. This is no exception in socialist market economy countries. Even so, we can prevent financial crises by improving the financial system. Liu Shibai pointed out a way to prevent financial crises.

Reasons

On July 2, 1997, the Asian financial crisis swept through Thailand and the Thai baht depreciated. Soon, the storm swept through places such as Malaysia, Singapore, Japan and South Korea. It broke the rapid economic development in Asia. The economies of some of Asia's major economic powers have begun to slump, and the political situation in some countries has also begun to be chaotic.

So, what is the reason for the outbreak of the Asian financial crisis?

After watching a series of reports on the Asian financial crisis and doing my own research, I found the following reasons:

1. George Soros’s personal and support Factors of other capitalist groups;

2. The influence of U.S. economic interests and policies;

3. Caused by the economic forms of Asian countries.

1: George Soros’s personal characteristics and the factors that support a capitalist group:

The “financial tycoon” and “an old wolf pretending to be asleep” are responsible for this financial monster. The title of talent. He once said, "In terms of financial operations, we cannot say whether it is moral or immoral. It is just an operation. The financial market does not belong to the category of morality. It is not immoral. Morality does not exist here at all, because it has its own The rules of the game. I am a participant in the financial market and I will play this game according to the established rules. I will not violate these rules, so I do not feel guilty or responsible in terms of the Asian financial crisis. Whether or not I speculate will have no effect on the occurrence of financial events. I don't think there is anything immoral about speculating on foreign currencies. On the other hand, I respect those rules and care about them. Rules. As a person who has morals and cares about them, I want to ensure that these rules are conducive to building a good society, so I advocate changing some rules if they affect me. In my own interests, I will still support it, because the rule that needs to be improved may be the reason for the incident." As we all know, Soros's speculation on the Thai baht was the fuse of the Asian financial crisis. He is an absolutely powerful and capable financier, but it is obviously despicable to achieve his goal of obtaining huge amounts of capital by playing with the political power of Asian countries.

2: The influence of U.S. economic interests and policies:

In 1949, the founding of New China heralded the establishment of the socialist camp. The United States, as the number one capitalist power, has a sense of crisis. He established a capitalist united front in the Asia-Pacific region through strong economic backing: South Korea, Japan, Taiwan and Southeast Asia have all become economic vassals of the United States. This has brought economic support to the rapid development of some Asian countries. In the 1970s, some Southeast Asian countries experienced rapid economic development.

However, in 1991, the collapse of the Soviet Union marked the collapse of the socialist camp. Of course, the United States would not allow the Asian economy to continue to develop like this, so it began to recover its economic losses. He condoned Soros' behavior.

Three: The economic patterns of Asian countries lead to:

Singapore, Malaysia, Thailand, Japan and South Korea are all countries with export-oriented economies. Their dependence on world markets is huge. The turbulence of the Asian economy will inevitably have consequences for the entire economy. Take Thailand as an example. Whether the baht is bought or sold in the international market is not decided by the government, and it does not have sufficient foreign exchange reserves. Faced with the speculation of financiers, the country's economy is vulnerable. The economy determines politics, so Thailand’s political situation is also turbulent.

Enlightenment

(1) The degree of openness of a country’s economy is based on strong economic strength and stable political power. Only when the economic strength is strong and the political power is stable can we talk about it. Really develop the economy.

(2) An economist can only promote social progress and development if he has a correct outlook on life and values. Otherwise, he will not be a real economist and will hinder economic development. effect.

(3) Only by improving comprehensive national strength can a country remain invincible.

Edit this paragraph to serious situation

The world is facing the most serious financial crisis in 60 years

The current financial crisis was caused by the bubble in the US housing market. In some ways, this financial crisis is similar to other crises that occurred every four to 10 years after the end of World War II.

However, there are fundamental differences between financial crises. The current crisis marks the end of an era of credit expansion that was based on the dollar as the global reserve currency. Other cyclical crises are part of larger boom-bust processes.

The current financial crisis is the culmination of a super-boom cycle that has lasted for more than 60 years.

Boom-bust cycles often revolve around credit conditions, and there is always a bias or misunderstanding involved. This is often a failure to recognize that there is a reflexive, circular relationship between willingness to lend and the value of collateral. When credit is easily available, it creates demand, and this demand drives up property values; this, in turn, increases the amount of credit available. Bubbles occur when people buy properties with the expectation of profiting from refinancing their mortgages. The boom in the U.S. housing market in recent years is evidence of this. The super-prosperity that lasted for 60 years is a more complicated example.

Whenever credit expansion encounters trouble, financial authorities have taken intervention measures to inject liquidity (into the market) and find other ways to stimulate economic growth. This creates an asymmetric incentive system, also known as moral hazard, which drives increasingly strong credit expansion. The system was so successful that people began to believe in what former U.S. President Ronald Reagan called "the magic of the market"—what I call "market fundamentalism." Fundamentalists believe that the market will tend to balance and that allowing market participants to pursue their own interests will best serve the interests of the community. This is clearly a misunderstanding, since it was not the markets themselves that saved financial markets from collapse, but rather the intervention of the authorities. However, market fundamentalism became the dominant way of thinking in the 1980s, when financial markets first began to globalize and the United States began running current account deficits.

Globalization allows the United States to absorb the savings of the rest of the world and consume more than it produces. In 2006, the U.S. current account deficit reached 6.2% of its gross domestic product (GDP). Financial markets encourage consumers to borrow by introducing increasingly sophisticated products and more generous terms. Whenever the global financial system faces danger, financial authorities intervene and contribute to the situation. Since 1980, regulation has been continuously relaxed, even to the point where it exists in name only.

Edit this paragraph: New financial crisis

The emergence of a global financial crisis

The subprime mortgage crisis has caused financial institutions in developed countries to re-evaluate risks and allocate assets. In the next two years, In 2019, funds from developed countries will reverse their influx and strengthen the stability of local financial institutions. This will lead to a sharp decline in securities market prices, depreciation of local currencies, decline in investment scale, slowdown in economic growth and even recession in emerging market countries. Among them, the three Baltic countries and India are the most vulnerable. The new financial crisis will put pressure on China's economic growth, but Chinese funds also face a good opportunity to "go out" to integrate and acquire corresponding companies at the bottom.

Dark clouds of a worldwide financial crisis are gathering. In the next two years, a new type of financial crisis will occur around the world. The biggest victims of this financial crisis will be some emerging market countries, which will bring challenges and new opportunities to China's economic development.

Reversal of capital flows will lead to financial crises in emerging market countries

Why will there be a new type of financial crisis in the world in the future? This starts with the basic pattern of financial industry development in developed economies and emerging market economies over the past decade.

In the past decade, developed economies represented by the United States and the United Kingdom have benefited from the general trend of globalization and have continued to prosper. However, the foundation of this prosperity is actually relatively fragile. The savings of these economies are relatively insufficient, consumption continues to grow, and the financialization trend of the economy continues to strengthen. This is reflected in the fact that households use existing financial assets, especially real estate, as collateral to borrow from banks to support their rising consumption. . The inevitable result of the development of this pattern is the breakdown of the consumer credit chain, and its concentrated manifestation is the subprime mortgage crisis in the United States. The subprime mortgage crisis caused US financial institutions to re-evaluate the cost of financial risks, and also required these financial institutions to reallocate their assets to reduce risks.

On the other hand, emerging market economies have attracted a large amount of funds from developed countries during their development over the past decade. Taking Mexico, Russia, India, Brazil and other countries as examples, half of their securities markets The above funds come from abroad. The increasing overseas capital not only drives up local asset prices, but also promotes the prosperity of the local economy. It also brings about the continuous appreciation of the real exchange rate of the local currency. This series of processes planted the seeds for financial crises in these economies, the most prominent of which are two regions: First, the three Baltic countries - Estonia, Lithuania and Latvia. Not only did their current accounts have deficits accounting for more than 10% of GDP, but their fiscal budgets also Deficits are also growing day by day, domestic price increases are intensifying, and these countries have also implemented a linked exchange rate system pegged to the euro, which is undoubtedly the best chemical reaction formula to lead to a financial crisis.

Another very fragile economy is India.

Although the Indian economy has maintained an average annual growth rate of more than 8% in the past three years, its macroeconomic situation is not optimistic: India's current account has been in deficit for a long time, more than half of the funds in the securities market come from overseas, and inflation The rate continues to rise, and the central government has been in a state of deficit for a long time.

Comprehensive consideration of some economic conditions in developed countries and emerging market countries, it is not difficult for us to draw a conclusion: in the next two years, the world economy is likely to reverse the flow of funds, that is, a few years ago Funds from developed economies rushed into emerging market countries in pursuit of high risks and high returns. When developed countries revalued risks, they reversed and flowed back to developed countries, strengthening the stability of financial institutions in developed countries. The formation of this trend will undoubtedly have a direct impact on developing countries and ultimately lead to the formation of financial crises in emerging market countries.