>Would the Asian bubble
>have expanded to the proportions it did without the Mexican "bailout" of a
>few years earlier? Would foreigners be buying Russian bonds if it weren't
>for their implicit IMF guarantee (which would probably be rated F- on their
>own credit merits)?
I think all of this "Mexico showed that the U.S. Treasury would bail everybody out, so everyone piled into East Asian investments that they knew were silly, and this creation of 'moral hazard' by the peso rescue package is the real cause of East Asia's troubles" is way, way overdone.
Excluding China, as best as I can calculate (very approximate numbers):
Investors in non-Japanese East Asian home currency-denominated corporate debt have lost approximately 60% of their principal in the past thirteen months...
Investors in non-Japanese East Asian home currency-denominated government bonds have lost approximately 50% of their principal in the past thirteen months...
Investors in non-Japanese East Asian corporate equities have lost approximately 70% of their investments in the past thirteen months...
Investors in non-Japanese East Asian dollar-denominated corporate debt have lost approximately 25% of their principal in the past thirteen months...
Investors in non-Japanese East Asian dollar-denominated bank debt have lost approximately 10% of their principal in the last thirteen months...
And investors in non-Japanese East Aian dollar-denominated government bonds are close to even.
A *lot* of investors in East Asia have taken a *huge* hit. It's clear to me that making those who haven't suffer just to reduce possible future moral hazard is not worth throwing an extra 10 million people out of work in East Asia...