ries course of economic development. To many observers, the glaring economic inequalities and high levels of unemployment in the West would be signs of the deficiencies in the Western style of capitalism. Though it is easy for people of the Asian model to point to Southeast Asia’s current economic collapse as evidence that the Asian system has failed. One of the immediate goals of the IMF bailout package to Thailand was to prevent further currency instability in the region. Yet much of the damage had already been done; after the devaluation of the baht, other currencies in Southeast Asia plunged. Most governments in the region were able to prevent their currencies from tumbling, though many countries used their multi-billion dollar reserves of foreign currency to buy back their declining domestic currencies. The debt that is risingOut of all the loans that have been taken out, you have to be asking yourself how much debt has South Asia created and how has this happened? The general consensus is that Asia’s debt stems largely from overzealous domestic investment. Being optimistic that Southeast Asia’s remarkable economic growth would continue, companies in the region borrowed huge amounts of money and poured it into investments such as real estate. When those investments didn’t profit, companies simply borrowed more money or extended their loans to cover outstanding debt. In some extreme cases, banks extended enormously risky loans because they were partly owned by the businesses that needed the funds. After all this risky borrowing those businesses that were not already bankrupt were looking at debts that were three to six times the total amount of cash invested in their companies. The comparison to this would be the U.S., which has a debt-to-equity ratio of one to one as opposed to the six to one in South Asia. Debts quickly led to bankruptcy when currencies fell and no one was willing to extend any more loans ...
