Explore BrainMass

Anatomy of a Currency Crisis: The Collapse of South Korean Won

This content was STOLEN from BrainMass.com - View the original, and get the solution, here!

Please refer to the attached document in providing solution the question below. All works, ideas, and solution must be original.

1. What role did the Korean government play in creating the 1997 crisis?
2. What role did Korean enterprises play in creating the 1997 crisis?
3. Why was the Korean central bank unable to stop the decline in the value of the won?
4. What are the common elements between the Korean financial crisis in 1997 and the economic meltdown that the United States experienced in 2008? Should the U. S. Government have done anything different to prevent the meltdown?

© BrainMass Inc. brainmass.com September 22, 2018, 7:31 pm ad1c9bdddf - https://brainmass.com/business/business-policy-and-implementation/anatomy-of-a-currency-crisis-the-collapse-of-south-korean-won-581817


Solution Preview

As a reminder, Experts cannot do assignments for students, and it was previously agreed that this response received should only be notes, ideas, guidance, research, and support. Therefore, although this response fully addresses the questions with direct answers from the article, it does NOT constitute a "hand in ready" assignment completion according to BrainMass.com guidelines.

Anatomy of a Currency Crisis: The Collapse of South Korean Won


1. What role did the Korean government play in creating the 1997 crisis?

According to this article, the Korean government, chaebol, companies, and central bank all played roles in creating the 1997 crisis.

The article clearly states the Korean government's role in creating the 1997 crisis began with Kim Young Sam, a populist politician who took office during the mild recession and promised to boost economic growth by encouraging investment. He's the one who urged the chaebol to invest in new factories. Then, as the volume of investments ballooned, the quality of those declined, which resulted in significant excess capacity and falling prices. Matters were complicated further because much of the borrowing had been in U.S. dollars, as opposed to Korean won. As a result, later on foreign investors, [whom may have been part of another chaebol] began to withdraw money from the Korean stock and bond markets, and the selling accelerated in mid-1997 when two of the smaller chaebols filed for bankruptcy. The increased supply of won and increase demand for U.S. dollars pushed down the price of the won in dollar terms. At this point, the central bank stepped in without regards to the debt problem faced by companies, and the fact that the government had stated intentions to take some troubled firms into state ownership. All of this caused the market to plunge, along with the S&P rating. So, it was obviously the Korean government's politician who started all the problems by encouraging chaebol investment, which may have been part of the plan, as they were an important causation for a chain of reactions to produce the 1997 crisis."

ORIGINAL Broader Perspective: However, is the article true? Who writes these articles...take a look, and see a source referenced as, "The Financial Times." Do you know who owns that source of media, or how newspapers, magazines, and News programs control public opinion? What if students were only given this information to shape their view of the world?

Like virtually all governments, the Korean system - coupled with international bankers - were the cause of the crisis effect. The Korean monetary system is no different than the dollar, euro, pound, or any other. The only difference is who's controlling the won and financial value that's placed on it. It's easy to increase or decrease the value of currency by the push of a button. As an example, if you get a mortgage or student loan, bankers simply TYPE the dollar amount ...

Solution Summary

Solution explores economics, bankers, money, and a McGraw-Hill case study, "Anatomy of a Currency Crisis: The Collapse of South Korean Won.". 1841 words with references are provided.