CURRENCY CRISIS PAST AND PRESENT 101
Want to know more about the currency crisis?
Well said by Dr M@Chedet in his blog…
4. Some even blame a lack of democracy which triggered the financial crisis. And many more. But as mentioned above, no one placed the blame on the manipulation of the currency, by currency traders.
6. In the light of the meltdown and the collapse of the financial bubble which had struck the great democracies like the U.S., Britain, Germany and others, should not these analysts and writers realise how ridiculous it is to attribute the Asian Crisis to a lack of democracy
27. The rich countries of the West had grown and prospered because of their industries i.e. the production of goods and the supply of services to their domestic market and to the world. Their cost was going up rapidly as the labour unions kept demanding for higher wages and expensive perks. But for as long as they remain the principal producers of the high-value goods and services, they could still sustain their production of goods and supply of services.
28. Then they discovered the poor countries with their cheap labour. Whenever they could they transferred their industries to these low labour cost countries in order to reduce cost and compete with the newly industrializing countries of East Asia. If whole industries could not be moved because of protest from their labour unions they would invest in the low labour cost countries for the production of simple parts and components. This way the European and American countries could compete with Japan and Korea.
29. But then the Japanese also did the same and they were able to remain highly competitive producing the same manufactured goods that were once monopolized by the Western countries. It was clear that the Japanese were going to displace most of the American and European manufactured goods in the world market.
30. Famous brands of American and European goods disappeared from the market altogether. The British gave up manufacturing cars, cameras, radios and televisions and other modern consumer products.
36. The financial market which had started in the 60s and 70s were not very attractive at first. But gradually the potentials were recognized and developed. New products were invented which gave ever increasing returns on investments.
37. Beginning with the sale of shares in order to raise money for capital, the smart players discovered that the buying and selling of shares could yield a lot of profits. The value of the shares were initially based on the profitability of the business.
38. But it became clear that the value would appreciate if there was demand. From then on the value of the shares became decoupled from the profitability of the enterprise. Demand or lack of demand determined the value of shares irrespective of the performance of the enterprise.
39. This led to the smart ones moving the share prices up and down by buying and selling. From this a short step led to the big players developing short selling.
Read more here: http://chedet.co.cc/chedetblog/2010/01/the-currency-crisis-past-and-p.html#more
