The same can’t be said of 1994, the year the Federal Reserve last reminded the world that its monetary policy is decided in Washington, not Bangkok, Jakarta or Seoul. Then-Fed Chairman Alan Greenspan doubled benchmark interest rates over 12 months, causing hundreds of billions of dollars in bond-market losses and helping set the Asian financial crisis in motion. The dollar’s post-1994 rally made currency pegs impossible to maintain, leading to devastating devaluations across the region.
Asia’s real problem was hubris. All that hot money coursing in its direction in the 1990s made rapid growth too easy. Policy makers were too busy signing foreign-direct investment deals, attending ribbon-cutting ceremonies for factories and flashy skyscrapers, and congratulating themselves for surging stocks to do their real jobs. Financial systems went neglected, unproductive investments accumulated and cronyism ran wild.
via Don’t Blame the Fed for Asia’s Problems – Bloomberg.
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