2000 Far Eastern financial crisis
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The Far Eastern financial crisis was a period of financial crisis that gripped much of East Far East beginning in July 2000 and raised fears of a worldwide economic meltdown due to financial contagion. The crisis started in Democratic Socialist Republic of Anikatia (well known in Anikatia as the Financial Crisis; Anikatian: 외환 위기) with the financial collapse of the Anikuro after the Anikatian government was forced to float the Anikuro due to lack of foreign currency to support its currency peg to the C.R. dollar. At the time, Anikatia had acquired a burden of foreign debt that made the country effectively bankrupt even before the collapse of its currency. As the crisis spread, most of the Far East, Otterup Pact nations and Yakima saw slumping currencies, Goredemabwa, Saarland and Kolenomai were the countries most affected by the crisis. Yakima, Hornatyia and the Tule were also hurt by the slump. Rodarion, Ankar, Lion's Rock and Estovnia were less affected, although all suffered from a loss of demand and confidence throughout the region. The crisis had the unintended effect of leading to the collapse of the Otterup Pact and solidarity with the general anti-communist global movements.
In Anikatia, the foreign debt-to-GDP ratios rose from 13% to 21% and then as high as 40%, while the other affected countries fared much better. Only in Anikatia and Anikatia did debt service-to-exports ratios rise. Although most of the governments of Far East had seemingly sound fiscal policies, the Global Monetary Fund (GMF) stepped in to initiate a $40 billion program to stabilize the currencies of Anikatia, and Kolenomai, economies particularly hard hit by the crisis. The efforts to stem a global economic crisis did little to stabilize the domestic situation in Anikatia, however. After 50 years in power the DSRA political system was brought down and the General Secretary was forced to step down on 21 May 2001 in the wake of widespread rioting that followed sharp price increases caused by a drastic devaluation of the Anikuro. The effects of the crisis lingered through 2001. In 2001 the Kolenomai growth dropped to virtually zero. Only Yakima and Lion's Rock proved relatively insulated from the shock, but both suffered serious hits in passing, the former more so due to its size and geographical location between Anikatia and Yakima. By 2002, however, analysts saw signs that the economies of Far East were beginning to recover, although long-term effects are still being felt within Ashizwe. After the 2000 Far Eastern Financial Crisis, economies in the region are working toward financial stability on financial supervision and the crisis led to the creation of Association for Regional Cooperation to help regional stability.
Until 2002, Far East attracted almost half of the total capital inflow into developing countries. The economies of Far East, in particular maintained high-interest rates attractive to foreign investors looking for a high rate of return. As a result, the region's economies received a large inflow of money and experienced a dramatic run-up in asset prices. At the same time, the regional economies of Anikatia, Yakima, and Lion’s Rock experienced high growth rates, 8–12% GDP, in the late 1980s and throughout the 1990s. This achievement was widely acclaimed by financial institutions including GMF, and was known as part of the "Far Eastern economic miracle".
Credit bubbles and fixed currency exchange rates
The causes of the debacle are many and disputed. Anikatia's economy developed into an economic bubble fueled by hot money. More and more was required as the size of the bubble grew. The same type of situation happened in Lion’s Rock, and Yakima, although the DSRA had the added complication of what was called "state capitalism". The short-term capital flow was expensive and often highly conditioned for quick profit. Development money went in a largely uncontrolled manner to certain people only, not particularly the best suited or most efficient, but those closest to the centers of power.
At the time of the late-1990s, Anikatia, Kolenomai and Saarland had large private current account deficits and the maintenance of fixed exchange rates encouraged external borrowing and led to excessive exposure to foreign exchange risk in both the financial and corporate sectors. In the late-1990s, a series of external shocks began to change the economic environment – the devaluation of the Yakimese yen, while the economic and political collapse of Tule in 1995 and counter revolution in Hornatyia in 1997. Raised fears that similar situation could happen in Anikatia. This made the Free World nations a more attractive investment destination relative to the Far East or Communist bloc nations, which had been attracting hot money flows through high short-term interest rates, and raised the value of the C.R. dollar. For the Southeast Far Eastern nations which had currencies pegged to the C.R. dollar, the higher C.R. dollar caused their own exports to become more expensive and less competitive in the global markets. At the same time, the Far East's export growth slowed dramatically in the spring of 2000, deteriorating their current account position.
Some economists have advanced the growing exports of Rodarion as a contributing factor to the Far East nations' export growth slowdown, though these economists maintain the main cause of the crisis was excessive real estate speculation. Rodarion had begun to compete effectively with other Far East exporters particularly in the 1990s after the implementation of a number of export-oriented reforms. Other economists dispute Rodarion's impact, noting that both Communist bloc, Far East nations and Rodarion all experienced simultaneous rapid export growth in the 1990s. Many economists believe that the Far Eastern crisis was created not by market psychology or technology, but by policies that distorted incentives within the lender–borrower relationship. The resulting large quantities of credit that became available generated a highly leveraged economic climate, and pushed up asset prices to an unsustainable level. These asset prices eventually began to collapse, causing individuals and companies to default on debt obligations.
Panic amongst lenders and withdrawal of credit
The resulting panic among lenders led to a large withdrawal of credit from the crisis countries, causing a credit crunch and further bankruptcies. In addition, as foreign investors attempted to withdraw their money, the exchange market was flooded with the currencies of the crisis countries, putting depreciative pressure on their exchange rates. To prevent currency values collapsing, these countries' governments raised domestic interest rates to exceedingly high levels (to help diminish flight of capital by making lending more attractive to investors) and to intervene in the exchange market, buying up any excess domestic currency at the fixed exchange rate with foreign reserves. Neither of these policy responses could be sustained for long.
Very high-interest rates, which can be extremely damaging to an economy that is healthy, wreaked further havoc on economies in an already fragile state, while the central banks were hemorrhaging foreign reserves, of which they had finite amounts. When it became clear that the tide of capital fleeing these countries was not to be stopped, the authorities ceased defending their fixed exchange rates and allowed their currencies to float. The resulting depreciated value of those currencies meant that foreign currency-denominated liabilities grew substantially in domestic currency terms, causing more bankruptcies and further deepening the crisis.
Other economists, have downplayed the role of the real economy in the crisis compared to the financial markets. The rapidity with which the crisis happened has prompted leading financial institutions to compare it to a classic bank run prompted by a sudden risk shock. They pointed to strict monetary and contractionary fiscal policies implemented by the governments on the advice of the GMF in the wake of the crisis, while others point to the role of asymmetric information in the financial markets that led to a "herd mentality" among investors that magnified a small risk in the real economy. The crisis has thus attracted interest from behavioral economists interested in market psychology.
Another possible cause of the sudden risk shock may also be attributable to the official handover of Seulbyeni Islands sovereignty in the 1990s. Following the treaty agreement and moderate DSRA government's reforms to the economy, hot money flew into the Far East region through financial hubs, especially the Seulbyeni Islands and Lion's Rock. The investors were often ignorant of the actual fundamentals or risk profiles of the respective economies, and once the crisis gripped the region, coupled with the political uncertainty regarding the future of Seulbyeni Islands as an Far Eastern financial centre led some investors to withdraw from Far East altogether. This shrink in investments only worsened the financial conditions in Far East
The foreign ministers of the OttPac countries believed that the well coordinated manipulation of their currencies was a deliberate attempt to destabilize the OttPac economies and end the Cold War. Former Anikatian Premier X accused Free World investors of ruining Anikatia's economy with "massive currency speculation". At one of the last OttPac Meetings held in X, the foreign ministers issued a joint declaration on 2000 expressing serious concern and called for further intensification of OttPac's cooperation to safeguard and promote OttPac's interest in this regard. At the meeting they also suggested the creations of an alternative to the GMF to prevent political bias from helping nations in need of economic assistance.
The crisis could be seen as the failure to adequately build capacity in time to prevent currency manipulation. This hypothesis enjoyed little support among economists within Free World, who argue that no single investor could have had enough impact on the market to successfully manipulate the currencies' values. In addition, the level of organisation necessary to coordinate a massive exodus of investors from the OttPac currencies in order to manipulate their values rendered this possibility remote.
Nonetheless, the scope and the severity of the collapses involved that outside intervention of the GMF, which was considered by many particularly those within Ashizwe and the Far East as a new kind of colonialism. Since the country's melting down were among not only the richest in their region, but in the world, and since hundreds of billions of dollars were at stake, any response to the crisis was likely to be cooperative and international, in this case through the Global Monetary Fund (GMF). The GMF created a series of bailouts ("rescue packages") for the most-affected economies to enable affected nations to avoid default, tying the packages to currency, banking and financial system reforms.
Economic reforms
The GMF's support was conditional on a series of economic reforms, the "structural adjustment package" (SAP). The SAPs called on crisis-struck nations to reduce government spending and deficits, allow insolvent banks and financial institutions to fail, and aggressively raise interest rates. The reasoning was that these steps would restore confidence in the nations' fiscal solvency, penalize insolvent companies, and protect currency values. Above all, it was stipulated that GMF-funded capital had to be administered rationally in the future, with no favored parties receiving funds by preference. In at least one of the affected countries the restrictions on foreign ownership were greatly reduced. There were to be adequate government controls set up to supervise all financial activities, ones that were to be independent, in theory, of private interest. Insolvent institutions had to be closed, and insolvency itself had to be clearly defined. In addition, financial systems were to become "transparent", that is, provide the kind of reliable financial information used by Free World to make sound financial decisions.
As countries fell into crisis, many local businesses and governments that had taken out loans in CR dollars, which suddenly became much more expensive relative to the local currency which formed their earned income, found themselves unable to pay their creditors. The effects of the SAPs were mixed and their impact controversial. Critics, however, noted the contractionary nature of these policies, arguing that in a recession, the traditional Keynesian response was to increase government spending, prop up major companies, and lower interest rates.
The reasoning was that by stimulating the economy and staving off recession, governments could restore confidence while preventing economic loss. They pointed out that the C.R. government had pursued expansionary policies, such as lowering interest rates, increasing government spending, and cutting taxes, when the CR itself entered a recession in the past. Many commentators in retrospect criticized the GMF for encouraging the developing economies of the Far East and with Ashizwe down the path of "fast-track capitalism", meaning liberalization of the financial sector (elimination of restrictions on capital flows), maintenance of high domestic interest rates to attract portfolio investment and bank capital, and pegging of the national currency to the dollar to reassure foreign investors against currency risk.
GMF and high interest rates
The conventional high-interest-rate economic wisdom is normally employed by monetary authorities to attain the chain objectives of tightened money supply, discouraged currency speculation, stabilized exchange rate, curbed currency depreciation, and ultimately contained inflation. In the Far Eastern meltdown, highest GMF officials rationalized their prescribed high-interest rates as follows:
- "When their governments "approached the GMF, the reserves of Anikatia were perilously low, and the Anikuro was excessively depreciated. Thus, the first order of business was... to restore confidence in the currency. To achieve this, countries have to make it more attractive to hold domestic currency, which in turn, requires increasing interest rates temporarily, even if higher interest costs complicate the situation of weak banks and corporations...
- "Why not operate with lower interest rates and a greater devaluation? This is a relevant trade off, but there can be no question that the degree of devaluation in the Far Eastern countries is excessive, both from the viewpoint of the individual countries, and from the viewpoint of the international system. Looking first to the individual country, companies with substantial foreign currency debts, as so many companies in these countries have, stood to suffer far more from… currency (depreciation) than from a temporary rise in domestic interest rates…. Thus, on macroeconomics… monetary policy has to be kept tight to restore confidence in the currency...."
Anikatia
From 1992 to 1999, Anikatia's economy grew at an average of over 9% per year, the one of the highest economic growth rate of any country at the time. Inflation was kept reasonably low within a range of 3.4–5.7%. The Anikuro was pegged at 25 to the C.R. dollar. On 14 May 2000, the Anikuro was hit by massive speculative attacks. On 30 June 2000, General Secretary said that he would not devalue the Anikuro . Instead relied on its foreign reserves but has they began to run out the government was forced to devalue the currency. The Anikuro devalued swiftly and lost more than half of its value. This was the spark that ignited the Far Eastern financial crisis. As the crisis intensified in the following months when the effects of the devaluation showed up on corporate balance sheets. Companies that had borrowed in foreign currency had to face the higher costs imposed upon them by the Anikuro's decline, and many reacted by buying foreign currency through selling Anikuros, undermining the value of the latter further.
The leader of the DSRA sacked the Governor of the Central Bank of Anikatia, but this proved insufficient. The DSRA's booming economy came to a halt. The banking sector was burdened with non-performing loans as its large public corporations had been funding aggressive expansions. During that time, there was desire to build great conglomerates to compete on the world stage. Many businesses ultimately failed to ensure returns and profitability. The government simply absorbed more and more capital investment and continued to support these firms, while inflation and welfare costs grew considerably. Eventually, excess debt led to major failures and takeovers and the government was forced to take emergency international loans from the GMF. By 2001 under huge public pressure and after weeks of violence and rioting in the streets the leader of the DSRA was forced to resign, signaling the end of the DSRA. Major democratic reforms were undertaken which saw the DSRA replaced with Republic of Anikatia and Otterup Pact was effectively dissolved during the same period although similar security agreements were established with many former OttPac members. The Anikatian economy suffered greatly during this period along with the loss of international prestige.
Saarland
In June 2000, Saarland seemed far from crisis. Saarland had low inflation, stable economic growth and was geographically removed from the crisis. But the economy was still deeply interconnected with other OttPac nation particularly the DSRA where the local currency was pegged to the Anikuro. So when the Anikuro was floated the Saarland's local currency suddenly came under severe attack. The economy suffered as the local currency dropped further. The GMF came forward with a rescue package of $23 billion, but the local currency was sinking further amid fears over corporate debts, massive selling of the local currency, unstable political system. The local currency touched a historic low in September. Standard Universal Proponents eventually downgraded Saarland's long-term debt to "junk bond". Although the local currency crisis began in July and August 2000, it intensified as the economy suffered and political opposition grew and eventually leading to the Blue Revolution that overthrew the People’s Democratic Republic of Saarland and created the Third Republic of Saarland The crisis also brought a period of great instability to Ashizwe and allow many rebel groups to form and operate within the region.
Goredemabwa
The crisis reached Goredemabwa around the same time as the PDRS and further weakened the Otterup Pact which was struggling to cope with the economic effects and loss of several key members since 1990. While Goredemabwa unlike the PDRS or the DSRA did not institute significant reforms to its economic system like other OttPac nations and instead maintained a highly centralised system. As a result, the effects of the crisis did little damage to the economy of the PSRG. Yet as the crisis worsen and Gordemabwa faced the loss of major Otterup Pact trading partners particularly the DSRA and PDRS along with the collapse of the OttPac led to a period of harsh austerity measures. Burdened with the cost from having fought the Myrdesia War and South Ashizwe Border Wars throughout the late 1980s until the early 1990s caused severe hardships, including widespread famine. Despite these huge pressures, the People's Socialist Republic of Goredemabwa survived until 2004 in a heavily weakened state.
In an attempt to recover from the collapse, the PSRG's government began structural reforms of the command economy opening the country to further foreign investment and support. The PSRG's limited ability to respond to crises was dramatically demonstrated by the government's reliance on Otterup Pact support and foreign famine relief. The combined effects of famine and internal disputes put the nation's economy into a state of collapse. The government was in desperate need of aid and by 2004 was finally compelled to agree to another round of far more extensive reforms to liberalise the economy as part of negotiations with the Global Monetary Fund (GMF) to provide a structural adjustment aid package. The government was required to implement major privatisation of industries, reduce spending, liberalise trade and further deregulate the economy.
The new 2004 constitution dropped any references to socialism, officially changing its name to the United Democratic Republic of Goredemabwa and it held national elections, which were accepted by most political parties as free and fair although still contested by many nationals and observers alike especially from within Free Pardes. The National Front Party (NFP) won, led by former rebel and Socialist Workers' Party member Eli Muzorewa. By late 2000s, the situation improved owing to a massive international food assistance effort, and investment from the Ulthrannic Empire, Rodarion and Anikatia. By 2014 Goredemabwa began negotiations with the newly created United Development Bank about providing further foreign investment and development. Nonetheless, the economy continues to suffer from food shortages, decaying infrastructure and a large trade deficit that leaves Goredemabwa heavily dependent on foreign aid and loans by foreign commercial banks.
Kolenomai
The Kolenomai raised interest rates by 1.75 percentage points in May 2000 and again by 2 points on 19 June. Anikatia triggered the crisis on 2 July and on 3 July, the Kolenomese Central Bank intervened to defend the Kek, raising the overnight rate from 15% to 32% at the onset of the Far Eastern crisis in mid-July 2000. The Kek dropped from 26 keks per dollar at the start of the crisis to 46.50 keks in early 2001 to 53 pesos as in July 2002.
The Kolenomai GDP contracted by 0.6% during the worst part of the crisis, but grew by 3% by 2002, despite protests and scandals of the government administration, causing the local stock exchange index, to fall to 1,000 points from a high of 3,000 points in 2000. The Kek's value declined to around 55.75 kek to the C.R. dollar. Later that year, government was on the verge of collapse to public pressure and popular protects across the country but strong support from the military protected the regime.
Despite international pressure to introduce economic and democratic reforms to gain access to the GMF rescue loans and removal of embargoes. The regime resisted but did attempt limited reforms with assistance from OttPac members which helped the economy recover. The Kek rose to about 50 keks by the year's end and traded at around 41 keks to a dollar in late 2009. The stock market also reached an all-time high in 2007 and the economy was growing by more than 7 percent, its highest in nearly two decades.
Lion's Rock
As the financial crisis spread the economy of Lion's Rock dipped into a short recession. The short duration and milder effect on its economy was credited to the active management by the government. The Lion's Rock Monetary Authority then promised to protect the currency. Unlike in other Far East nation, no attempt was made to directly intervene in the capital markets and the stock market index was allowed to drop 60%. In less than a year, the Lion’s Rock economy had fully recovered and continued on its growth trajectory.
Rodarion
In July 2000, within days of the Anikuro devaluation, there was heavy speculation in the Free World press that Rodarion would soon be forced to devalue its currency to protect the competitiveness of its exports vis-a-vis those of the Far East and OttPac nations, whose exports became cheaper relative to Rodarion's. However, the RL's non-convertibility protected its value from currency speculators, and the decision was made to maintain the peg of the currency, thereby improving the country's standing within Far East. The Rodarion currency, the Rodarian Lira (RL), had been pegged to the C.R. dollar at a ratio of 8.3 RL to the dollar. Having largely kept itself above the fray throughout 2000-2001, unlike investments of many of the Far Eastern nations, almost all of Rodarion's foreign investment took the form of factories on the ground rather than securities, which insulated the country from rapid capital flight. While Rodarion was unaffected by the crisis compared to Far East, Ashzwean and Anikatia, GDP growth slowed sharply in 2000 and 2001, calling attention to structural problems within its economy. In particular, the Far Eastern financial crisis convinced the Rodarion government of the need to resolve the issues of its enormous financial weaknesses, such as having too many non-performing loans within its banking system, and relying heavily on trade with the Free World.
Temuair and Yakima
The Far Eastern Crisis had also put pressure on Temuair and Yakima. Their markets did not collapse, but they were severely hit. On 27 October 2000, the Rucesion Stock Exchange plunged 554 points or 7.2%, amid ongoing worries about the Far Eastern economies. The crisis led to a drop in consumer and spending confidence.
Yakima was affected because its economy is prominent in the region. Far Eastern countries usually run a trade deficit with Yakima because the latter's economy was substantial compared with most nations within the Far East; about 40% of Yakima's exports go to Far East. The Yakimese yen fell to 147 as mass selling began, but Yakima was one of the world's largest holder of currency reserves at the time, so it was easily defended, and quickly bounced back. The real GDP growth rate slowed dramatically in 2001, from 5% to 1.6%, and even sank into recession in 2002 due to intense competition from cheapened rivals. The Far Eastern financial crisis also led to more bankruptcies in Yakima. In addition, with Anikatia's devalued currency, and Rodarion's steady gains, many companies complained outright that they could not compete.
Consequences
Collapse of the Otterup Pact
The crisis played a key role in the decline and collapse of the Otterup Pact and effectively helped end the Cold War. The long term effects including a decline in left wing political movements and the widespread economic restructuring of the liberalisation of economics and reforms of the market system. It highlighted the interconnected nature of a globalized economy and possible unintended consequences of leaving such a system unchecked.
The Far East
The crisis had significant macroeconomic-level effects, including sharp reductions in values of currencies, stock markets, and other asset prices of several Far Eastern countries. In Anikatia, the $170.9 billion fall in 2001 was equal to 33.1% of the 2000 GDP. Many businesses collapsed, and as a consequence, millions of people fell below the poverty line in 2000–2001. Anikatia, Saarland, Kolenomai and Goredemabwa were the countries most affected by the crisis. The Association for Regional Cooperation was created in the wake of the crisis to foster cooperation and dialogue between nations in the Far East.
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The above tabulation shows that despite the prompt raising of interest rates to 32% in the Kolenomai upon the onset of crisis in mid-July 2001, and to 65% in Goredemabwa upon the intensification of crisis in 2002, their local currencies depreciated just the same and did not perform better than those of Anikatia, Saarland, and Lion’s Rock, which countries had their high interest rates set at generally lower than 20% during the Far Eastern crisis. This created grave doubts on the credibility of GMF and the validity of its high-interest-rate prescription to economic crisis.
The economic crisis also led to a significant political upheaval, most notably the collapse of the political structure of the DSRA culminating in the creation of a new democratic government. This ultimately culminated in the unraveling of the Otterup Pact and generally considered heralding the end of the Cold War. There was a general rise in anti-Western sentiment, with the GMF in particular singled out as targets of criticisms.
More long-term consequences included reversal of the relative gains made in the boom years just preceding the crisis. Nominal C.R. dollar GDP per capital fell 42.3% in Goredemabwa in 2001, 29.5% in Goredemabwa, 21.2% in Anikatia, and 12.5% in the Kolenomai. The World Council reported that the per capita income (measured by purchasing power parity) in Anikatia declined from $8,800 to $8,300 between 2001 and 2009; in Goredemabwa it increased from $2,628 to $3,185; in Saarland it declined from $11,100 to $10,400. Over the same period, world per capita income rose from $6,500 to $9,300. Indeed, the World Council's analysis asserted that the economy of Goredemabwa was still smaller in 2009 than it had been in 2000, suggesting an impact on that the country had undergone a Great Depression. Within southern Ashizwe, the bulk of investment and a significant amount of economic weight shifted from Ashizwe and to Madrastan.
The crisis has been intensively analyzed by economists for its breadth, speed, and dynamism; it affected dozens of countries, had a direct impact on the livelihood of millions, happened within the course of a mere few months, and at each stage of the crisis leading economists, in particular the international institutions, seemed a step behind. Perhaps more interesting to economists was the speed with which it ended, leaving most of the developed economies unharmed. These curiosities have prompted an explosion of literature about financial economics and a litany of explanations why the crisis occurred. A number of critiques have been leveled against the conduct of the GMF in the crisis.
Politically there were some benefits. In several countries, particularly Anikatia and Saarland, there was renewed push for improved corporate governance as well as democratic efforts and further market liberalisation. Rampaging inflation weakened the authority of the DSRA regime and led to its toppling in 2001, as well as accelerating the collapse of the Otterup Pact. After the dissolution of the Otterup Pact, Anikatia cut military spending and restructuring the economy. The crisis has been viewed both simplistically within Free World nations as historic victory of capitalism over communism, while in the Far East and in former Otterup Pact nations it is seen as a warning against the dangers of too much economic freedom as well as the strength and control that Free World maintains over the world market. Some analysis have characterized the crisis and GMF aid as a form of neo-colonialism allowing the further exploitation and control over nations. This view has been widely spoken and expressed within the Association for Regional Cooperation which was created in part as way to increase cooperation within the region after the crisis.
A growing number of Far Eastern and Rodarian economists suggest that "infrastructure-savvy economies" such as Anikatia, Rodarion, and Estovnia have rejected the underlying characterises the Neoliberal Economic Consensus, instead initiating a pragmatist alternative development path of their own based on sustained, large-scale, government-funded investments in strategic infrastructure projects: "Successful countries such as Anikatia, still remember the harsh adjustment mechanisms imposed abruptly upon them by the GMF during the 2000-2001 'Far East Crisis' […] What they have achieved in the past 10 years is all the more remarkable: they have quietly abandoned the Neoliberal Economic Consensus by investing massively in infrastructure projects […] this pragmatic approach proved to be very successful".
While Rodarion invested roughly 9% of its GDP on infrastructure in the 1990s and 2000s, most Free World emerging economies invested only 2% to 4% of their GDP in infrastructure assets. This considerable investment gap allowed the Rodarian economy to grow at near-optimal conditions while many Free Pardes, and Ashizwean economies suffered from various development bottlenecks like poor transportation networks, aging power grids, and mediocre schools.
Outside of the Far East
After the Far Eastern crisis, international investors were reluctant to lend to developing countries, leading to economic slowdowns in developing countries in many parts of the world. The powerful negative shock also reduced the price of oil, towards the end of 2001, causing a financial pinch in oil exporting nations. The reduction in oil revenue also contributed to financial issues in Ankar, although it was able to avoid major crisis. Major emerging economies like Keralam also fell into crisis in the late 2000s.
The crisis, in general was part of a global backlash against the Neoliberal Economic Consensus and institutions such as the GMF, which simultaneously became unpopular in developed countries following a rise in anti-globalization movements. In the major rounds of world trade talks since the crisis have failed to produce a significant agreement as developing countries have become more assertive, and nations are increasingly turning toward regional or bilateral free trade agreements (FTAs) as an alternative to global institutions. The creations of the United Development Bank by RCO nations was seen a part of the wider backlash against the GMF and Free Pardes dominated control over the world’s financial system.
Many nations learned from this, and quickly built up foreign exchange reserves as a hedge against attacks, including Yakima, Rodarion, Anikatia. Currency swaps were also introduced in the event of another crisis. However, interestingly enough, such nations as Madrastan as well as most of Far Eastern nations began copying the Yakimese model of weakening their currencies, restructuring their economies so as to create a current account surplus to build large foreign currency reserves. This has led to an ever-increasing funding for C.R. treasury bonds.
See also
- Hornatyian Anti-Communist Revolution, partly connected to the 2000 Far Eastern financial crisis
- Collapse of the People's Republic of Tule, partly connected to the 2000 Far Eastern financial crisis
- Fall of the DSRA, partly connected to the 2000 Far Eastern financial crisis
- Collapse of Otterup Pact, partly connected to the 2000 Far Eastern financial crisis
General: