. Though impossible to prevent financial crises from happening again, Economists are studying on how to recover from a crisis much faster. And so far the free flows of financial capital is the best way to go. In the early 1990’s Japan’s economy was booming. Then their products were becoming superior and technology was on the rise. But as the years went by in the 1990’s, Japan felt that their economy was getting slower and slower. By 1995, Japan felt the full effect of the collapse of the financial bubble of the 1980’s. This depressed consumption and investment spending. Japan knew that they were going to be in trouble; they felt a huge inflation coming on. At the point, Japan’s economy had little economic growth and was in stagnation. Once the investment panic hit, it was all over. There was nothing that Japan’s advisors could do. They tried lowering interest rates, at one point the interest rate was at zero, and still no success. The whole country was under the impression that their economy was hopeless. With the short-term interest rates around zero, Krugman suggested that it was time for the engineering of inflation to extract Japan from what economists call the "liquidity trap.” Krugman explained Japan’s present period of stagnation very clearly and presented it in a very amusing way. With the Asian crisis over with, many countries have quickly recovered from the whole mess but many others are not as fortunate. Japan will still have many rough years ahead before they get that bitter taste out of their mouth. The "MIT" economies (Malaysia, Indonesia, Thailand) all had similar outcomes from the crisis and that may be due to the fact that all three countries are exporting similar products. But Indonesia is taking a bigger hit than the other two because of political turmoil. Financial analysts are to be blamed for the Asian crisis. Once again they tend to look at the lo...
