These days it seems practically everything is made in Asia. Everything, that is, apart from economic crises. For the moment, at least, those can still be produced in the US.
Ever since Ben Bernanke, chairman of the US Federal Reserve, hinted in May that there may be an end in sight to the policy of aggressive monetary easing, emerging markets have been severely tested. Talk of tapering the Fed’s purchase of $85bn a month in government bonds from as early as September has pushed up long-term US interest rates. That in turn appears to have triggered a partial reversal of the carry trade in which investors borrow in dollars to purchase higher-yielding assets, often in emerging markets. Currencies and stock markets around the world, especially in countries with current account deficits financed by fickle capital inflows, have tumbled.
In Asia, which came through the 2008 financial crisis seemingly unscathed, questions have been raised about economies that, until fairly recently, were counted as success stories. Indonesia, a country of 240m people with a 10-year record of solid growth, is in the spotlight as its currency and stock market slide. Between April and July, its central bank spent nearly $15bn, or 14 per cent of its total reserves, defending the rupiah, according to Morgan Stanley. In spite of that, the rupiah has fallen nearly 15 per cent against the dollar since May.