Starting in July 1997, a financial crisis erupted in Asia, followed a year later by the 1998 financial crisis in the United States.
In the early 1990s, many investors invested in development projects in Thailand. To do so, they converted cheap U.S. dollars into Thai baht and invested in projects such as hotels or real estate with high profits. At that time, investing in Thailand was considered low-risk because the Thai baht was pegged to the U.S. dollar at a fixed exchange rate and was freely convertible. In July 1990, Thai authorities cut the peg to the U.S. dollar, resulting in an immediate 20% devaluation of the Thai baht. Investors who had initially invested in low-risk assets suffered heavy losses. A large capital outflow began, and investors abandoned their investments.
The fire spread to Indonesia and South Korea, which followed the same monetary policy as Thailand. On October 14, Indonesia removed the rupiah’s peg to the U.S. dollar. The rupiah then plunged massively, triggering a mass panic in the country. The panic led to riots, and bloody clashes broke out between the desperate population and the police.
The financial crisis led to a severe loss of confidence among investors, who no longer had faith in the developing markets.
The obvious arsonist at the time was the International Monetary Fund (IMF), which provided capital to Thailand, Indonesia, and South Korea to restore their reserve positions. This was able to extinguish the fire and bring the situation under control for the first time.
The ones who suffered, however, were the citizens, because in return the IMF cut the budget, devalued the currencies, and raised taxes in the countries to bail out the banks and bondholders.
Article Source
Rickards James, 2016, The Road to Ruin – The global Elite’s Secret Plan for the next financial crisis, Penguin Business