Critically examine why financial liberalisation brought financial Essay

Critically examine why financial liberalisation brought financial crisis in most of the Asian countries (for example South Korea, Malaysia, Indonesia and Thaila - judge ExampleTransactions in financial securities industrys are affected by the efficiency of intermediaries much(prenominal) as brokers who put buyers and sellers together and professionals who keep the merchandise in operation, ranging from clerks who keep records and financial analysts who allow information to flow within, to, and from the market (Howell et al., 2002).Historically, financial markets evolved under the close supervision, regulation, and protection of governments for the good of market agents (the suppliers and users of funds). Through laws, suppliers of funds such as depositors or lenders were protected from swindlers who ran away with the money, whilst users or funds borrowers had to be protected from usurious lenders.Whilst the government also made it difficult for a mild number of market agents to establish an oligopoly, it also saw the need to create monopolies mainly for legitimate reasons such as the regulation of prices, public protection, and to stimulate market competition. However, when governments become too complacent, these legitimate reasons become intertwined with political factors and became illegitimate and burdensome, and instead of improving market efficiency it had the opposite effect markets became too costly, prices were too high, artificial, and non competitive, and therefore highly inefficient.Inefficiency is tantamount to a lack of freedom in the operations of markets, so the call for market liberalisation is in effect a strategy to free the market from government regulations. Liberalisation is the removal of government interference in economic markets and barriers to trade (Stiglitz 2002 59) and is supposed to improve a nations sparing by forcing resources to move from less to more productive uses, thereby raising efficiency in the use of resources.Li beralisation is not necessarily a cock-a-hoop thing because in fact and intention, it is for the benefit of market agents. However, like most other realities of life, if it is not done well it can end in disaster. but to give some examples easy to understand you dont ask a young man who just received his drivers license to race against David Coulthard or expect the Manchester direct districts soccer champions to play well against Manchester United. Yet, this is what liberalisation attempts to do the best way to improve the efficiency of financial markets is to let it free, which usually means allowing competitors both topical anaesthetic and foreign to slug it out in open competition. The good ones will adjust, learn, and survive, whilst the poor ones will disappear.The financial markets of Southeast Asia before the crisis shared the characteristics of a market that was not free and of being under the influence of government regulations that stifled competition. The foreign exch ange market was protected by a government that intervened in transactions to keep the local currencies artificially high. Bank interest rates were kept artificially low to favour local borrowers, which included local governments and favoured conglomerates. full with cheap funds, wanton borrowing and wild lending happened side by side to construct golf courses and buildings and purchase Porsches.How Inefficiency breeds CrisisThe Asian financial crisis of 1997-1998 has been one of the well-studied