A Thai Post Mortem

CAMBRIDGE: There are lessons from Thailand’s currency debacle beyond the sheer fun of pointing fingers. For how can a country reach meltdown proportions when, only a few months back, barely a problem existed. And if “tiger economy” Thailand can get into big trouble, woe to Latin America and some postcommunist countries.

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Thailand’s problem, like Mexico a few years ago, was its vulnerability, meaning that if one thing in the economy goes wrong, suddenly many things go wrong. The cause of Thailand’s crisis was the combination of a shaky banking system (made shakier by the dollar debts of its clients), a large, short-dated foreign debt with the resulting risk of a funding crisis, and a total lack of transparency coupled with a pervasive overlay of corruption. In Thailand, almost every politician or official had his hands in the pocket of some bank or business; every bank had officials in its pockets, too.

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