Here's a hint - we're in round two of something similar now.
The International Monetary Fund (IMF) is essentially the world's loan shark working to stabilize international exchange rates and provide temporary financial relief.
It actually reminds me of that Korean monthly lottery that some older women play: Everyone donates something like 50$ every month to a pot and a random name is drawn until all names have been drawn. Whoever's name is drawn gets everyone's money for that month. I mean, technically, no one wins or loses anything - the money is just shuffled around indefinitely - but it seems like you win the lottery for that month.
The IMF works kind of like this (read: not at all like this) but just make all participants spread throughout the world, level out the exchange rate, and make the pot available for those who only really need it on a temporary basis. So instead of winning the lottery, it's more like a handout in times of need. You repay the pot by getting back on your feet and get back to contributing to the group as a whole. The idea is that if all participating country's economies are doing well, it reciprocates down the road by improving everyone's economy (Keynesian economics).
Let me tell you, this sounds like a treehouse club that I want to be apart of. So why is this worldwide organization share it's name with one of the worst economic disasters since the Great Depression? Moreso, why haven't most Americans ever heard of it?
All countries who are members of the United Nations participate in the IMF with the exception of few countries including North Korea and Cuba. That still leaves 185 contributing countries working together for over 60 years. It also works by a weight system (much like the U.S. House of Representatives). The higher the quota, the higher voting power a particular country has. For example:
- United States - 17.09% of the total quota
- Japan - 6.13% of the total quota
- United Kingdom - 4.94% of the total quota
- South Korea - 1.35% of the total quota
Let's set the stage for the 1997 crisis: Confidence in the Thai baht dropped during the summer of 1997 and the resulting scare reminds me of something that happened in WoW. Indonesia, Malaysia, and South Korea eventually followed suite. However, Bangkok didn't share the sole responsibility for the problem as other East Asian countries were borrowing funds to invest locally without exactly paying back what they borrowed. On top of that, the projects and investments chosen weren't exactly cash cows which further devalued the local currency. This rapid drop in value of baht affected the ringgit which in turn affected the rupiah which in turn affected the won. Ever read If You Give A Mouse A Cookie...? In this case it stemmed from poor management from governments and ever worse advice from the IMF. opps. Isn't there like a reset button?
So where does Korea fit in during the 1997 crisis? After Korea suffered from this hit in the collective wallet of millions, it was in dire need for help - and like the Ultimate Warrior coming down the ramp to enter the ring - the IMF popped in and gave Korea a 57 billion dollar loaner. Crisis contained. The countries highlighted below were most affected. Wikipedia is great, isn't it?
So to answer one of first questions posed, the main reason why most Americans didn't pay attention was for four main reasons
- we were still a little freaked out over Dolly
- Hong Kong went back to the Chinese
- Titanic premiered and jumped-started teenage obsessions with Leonardo DiCaprio
- South Park debuted
Our minds were elsewhere - sorry.
So, why should anyone care about a currency crisis that happened 12 years ago? If anyone has ever been overseas for an extended period of time, they know first-hand that the currency conversion rate is one of the first things in their mind once they get a paycheck (second only to the quickest and cheapest route to inebriation). Typically, one can usually insta-translate Korean won (원 ₩) to United States dollars (USD $) by simply subtracting three zeros from the end. So, if a beer at that bar that we were gunning for costs 2000원, then we can insta-realize Wow, that is a two dollar beer. This understanding comes at the common knowledge that 1000원 usually means 1$. But of course this isn't always the case. In the case of the 1997 crisis, the rate was 1700원 to 1$. That's almost cutting your wallet in half. Similarly, if the won is closer to 800원 to 1$, then people entering the country with a fistful of American dollars will be losing a slight amount in the conversion. Good for the won but not so good for the dollar. As of January 4th 2009, 1 USD = 1312 원. ouch.
However, here's a situation that Americans hope to run into:
An American enters with a cash amount around, say, a few thousand dollars, converts it to won, stays for a period of time, plans to leave the country later with a comparable amount in won, converts it back to dollars before leaving to find out that the rate has changed in his/her favor. You passed "Go" so collect 200 dollars. Thank you for doing nothing. Can you believe that people do this (currency conversion) for a living?
Anyways, to wrap things up, it would be cliche of me to point out that South Korea and the rest of the world are globally linked and dependent on each other for stability. However, it's important to hope that in the future such events like the crisis in 1997 won't go unnoticed by the rest of the world (read: USA). Sure, currency stability sounds about as fun as watching paint dry but it does affect more of us than we like to admit. Here's to a future of prosperity!