The Little Book of the Shrinking Dollar: What You Can Do to Protect Your Money Now

Asian Banking Crisis 1998

First there was the Asian economic miracle. Then came the crash.

In 1997, Asian central banks couldn’t help themselves anymore. They held large current account deficits. They were addicted to foreign hot money flows.

Thailand, the epicenter, couldn’t tackle the aftermath of a real estate bubble collapse. Thai stocks dropped 75 percent. Things began spiraling out of control when the government cut its peg to the U.S. dollar (the major component in a basket of currencies) and allowed the baht to float. It lost half of its value. The crisis ripped through Southeast Asia, devaluing stocks and destroying currency values. South Korea, Thailand, and Indonesia sent the SOS to the IMF to stabilize their currencies.

After Thailand, Malaysia was one of the nations to suffer the most. Before July 1997, Malaysia was a top investing destination, on the track to hit developed status by 2020.

Once currency speculators finished raiding the baht, they attacked the Malaysian ringgit. In despair, the premier clapped capital controls on the nation and pegged the ringgit to the U.S. dollar for seven years.

By 2005, Malaysia was a very different place. Bad banks were bought out by the stronger, better ones. Companies who couldn’t get their financial house in order were delisted. Its current account deficit turned into a huge U.S. $14 billion surplus.

Today, the ringgit’s not officially pegged to the dollar, but its currency board monitors its value against an undisclosed basket ...