It is 10 years since the Asian currency crisis. Currency crises are like earthquakes. I hesitate to use this analogy when lives have been lost and people continue to suffer as a result of the quake last week in the Chuetsu area of Niigata Prefecture. Yet the parallel is a valid one.
A sudden and violent realignment of currency values destroys people's assets. What was seemingly a mound of gold turns into ashes in a flash. The erstwhile wealthy become poverty-stricken overnight. Aftershocks are liable to strike when they are least expected. It takes time to recover from the destruction that the shock waves cause. Normal life does not resume that easily in the wake of currency turmoil.
Can it happen again? And if so when, and under what circumstances? As with earthquakes, none of these questions is easy to answer with any amount of accuracy. The majority view seems to be that the risk of a reoccurrence is a small one, given that East Asians have learned their lesson well, their foreign exchange reserves are running at unprecedented levels and their financial markets have become altogether more sophisticated. These are all reasonable arguments against the possibility of another currency shock wave emanating from East Asia. The Asian landscape does indeed look a lot healthier than 10 years ago.