World Economic Crisis
The World Economic Crisis: 1991-2001 Part 2 By Nick Beams
15 March 2002 Use this version to print | Send this link by email | Email the author Below we are publishing the second part of a lecture given on January 16, 2002 by Nick Beams, national secretary of the Socialist Equality Party (Australia) and a member of the International Editorial Board of the World Socialist Web Site ._ The lecture was delivered at an international school held in Sydney by the Socialist Equality Party of Australia. The _first part_ was published on March 14 and the _conclusion_ was published on March 16._ The 1987 stock market crash ushered in the 1990s. While originating on Wall Street, the collapse was, in every sense, a global phenomenon. Conflicts between US government and financial authorities and German bankers over interest rates led to fears about a rapid fall in the value of the dollar, resulting in a withdrawal of funds from the US financial system. Only through massive intervention by the US Federal Reserve Board and other central banks was a global financial crisis averted. These institutions injected large amounts of liquidity into the global financial system. But, in a pattern that was to be repeated throughout the decade, the very measures they used to combat the crisis created the conditions for even more serious problems to arise. In this case, the injection of liquidity helped further inflate the already growing Japanese financial bubble. The Japanese bubble had its origins in the Plaza agreement of September 1985, under which the central banks agreed to revalue the world’s major currencies against the US dollar. The dollar devaluation and yen revaluation had two immediate consequences. Firstly, Japanese exports became more expensive, leading to a shift of Japanese manufacturing to the East Asian region, where currencies stayed in line with the devalued US dollar. Secondly Japanese assets were revalued, leading to the escalation in Japanese property and land...
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