Asia Afloat

ON July 2, the Thai government gave up its longstanding policy and allowed its currency, the baht, to float. Once again, a government had wasted billions of dollars of taxpayer money—as much as $30 billion in this case—trying to fix an exchange rate without thinking about why the currency was under pressure.

The decision to float did not end the crisis. The Thai baht remained under pressure, and the pressure spread to neighboring countries—principally Indonesia, Malaysia, and the Philippines. They all abandoned their currencies’ fixed exchange rates with the dollar and, like Thailand, permitted them to float. Still the crisis didn’t end. It spread to Taiwan and Hong Kong and from Hong Kong to the world’s stock markets.

About the Author

Allan H. Meltzer

Allan H. Meltzer is a professor of political economy at Carnegie Mellon University, a visiting scholar at the American Enterprise Institute, and the author of A History of the Federal Reserve.

Featured Tags

ON July 2, the Thai government gave up its longstanding policy and allowed its currency, the baht, to float. Once again, a government had wasted billions of dollars of taxpayer money—as much as $30 billion in this case—trying to fix an exchange rate without thinking about why the currency was under pressure.

The decision to float did not end the crisis. The Thai baht remained under pressure, and the pressure spread to neighboring countries—principally Indonesia, Malaysia, and the Philippines. They all abandoned their currencies’ fixed exchange rates with the dollar and, like Thailand, permitted them to float. Still the crisis didn’t end. It spread to Taiwan and Hong Kong and from Hong Kong to the world’s stock markets.

About the Author

Allan H. Meltzer

Allan H. Meltzer is a professor of political economy at Carnegie Mellon University, a visiting scholar at the American Enterprise Institute, and the author of A History of the Federal Reserve.