Question

The phrase "when the tide goes out we can see who was swimming without clothes" is an adage referencing which of the following scenarios?

		falling sea levels create trade shocks for countries heavily reliant on fish industry
		when capital inflows cease, current account deficits become apparent
		when excessively risky positions have been taken by banks international capital exits rabidly
		when GDP declines, households that have budgeted poorly become apparent

The first of the East Asian Tigers to experience speculative attack and collapse of the exchange rate was

		Thailand
		Indonesia
		Japan
		Argentina

The international community organized large bailout and relief packages to aid the East Asian region during the crises.

True

False

Had the domestic financial sectors managed capital inflows in a more prudent fashion the East Asian Crises probably could have been avoided.

True

False

Answer 1

Ans 1. Option 2 is correct.

when capital inflows cease, current account deficit becomes apparent

This phrase is given by Warren Buffet and he is referencing to stock markets mostly. Though it can be applied to any situation where the poor or bad performance will become apparent when the good times are gone. This statement is referring to the East Asian financial crisis when the nations experienced the boom period with high capital inflows and then extreme speculative attacks that damaged their economies.

Ans 2. Option 1 is correct. Thailand.

In the year 1985, Thailand experienced the highest economic growth, and then in May 1997, the Thai Baht was hit by extreme speculative attacks which made its economy collapse. Other East Asian nations were hit after that.

Ans 3. Option 1 is correct. True.

IMF approved a $40 billion program to improve and stabilize the financial crisis of the East Asian nations. Although the nations still took some years to properly stabilize. In this phase, the economies and political structure of these nations took some new turns.

Ans 4. Option 1 is correct. True.

There was insufficient institutional development at that time when the crisis took place. The banking system was not stable and was not able to handle the massive debts and the reduced value of assets of banks created more burden. So better debt and risk management by the banks are very important.