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Greenspan: crisis will pass
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December 2, 1997: 9:00 p.m. ET
Fed chief says problems in Asia will subside in favor of stability
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NEW YORK (CNNfn) - In a departure from his usual cautionary tone, Federal Reserve Chairman Alan Greenspan said Tuesday financial crises in Asia will subside and leave the nations with stronger economies.
"While the adjustments may be difficult for a time, these crises will pass. Stronger individual economies and a more robust and efficient international economic and financial system will surely emerge in their wake," Greenspan said in remarks prepared for a gathering of The Economic Club of New York.
Despite his upbeat tone, nations throughout Asia continued to deal with financial upheaval. The latest news came Tuesday from South Korea which said it and the International Monetary Fund would sign a deal Wednesday morning to bail out the country's struggling economy.
While no specifics were given, officials said the package would mirror assistance already given to Thailand, which received $17 billion in aid, and Indonesia, which received $40 million in IMF assistance.
Greenspan said the current Asian crisis will likely accelerate the move from large amounts of government-directed investment to a system that encourages more private-sector involvement.
He said the booming stock markets of the 1990s led many in Asia to expect unrealistic returns.
While Asia's troubles have rattled investors, Greenspan said they were largely inevitable, but characterized them as only temporary.
"There is no reason that above-average growth in countries that are still in a position to gain from catching up with the prevailing technology cannot persist for a very long time, provided their markets are opened to the full force of competition."
Greenspan closed by saying that as more economies around the world become global forces, it's inevitable that crises around the world will require more attention.
"It is, hence, all the more essential that the weaker links in our international financial system, the banking system of the emerging nations, be strengthened. Preventive programs should be accelerated sufficiently far in advance of the next crisis to effectively thwart or contain it."
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U.S. Federal Reserve
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