3

Did the Asian crisis teach us nothing?

A tiger’s meat is edible.

Sila Khoamchai, The Path of the Tiger (tr. Marcel Barang, 1994)

In the past ten years, global flows of capital have had many effects on the world’s finances and without doubt they helped create the credit bubble of 2005–07. The movement of money affected emerging Asia’s trade and reserves policies, influenced Japan’s export of capital and led to pressure for regional convergence within the European single currency. All three capital flows promoted huge cross-border lending with little regard for the wider consequences. In the end, the world was not enough for the flows, and resulted in huge misallocation of resources in destination countries. Along the way was not one ...

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