world financial crises in context of malaysia
TRANSCRIPT
![Page 1: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/1.jpg)
Dr. Mohamed Eskandar Shah Mohd Rasid
Deputy Dean of Graduate Studies - INCIEF
Financial Crises
![Page 2: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/2.jpg)
Hotlist of Crises
PANIC OF 1907, A U.S. ECONOMIC
RECESSION WITH BANK FAILURE
PANIC OF 1907, A U.S. ECONOMIC
RECESSION WITH BANK FAILURE
Wall Street Crash of 1929 - Black Tuesday and
Great Depression 1929 - 1945
Wall Street Crash of 1929 - Black Tuesday
and Great Depression of 1930 - 1945
Black Monday (1987)The largest one-day percentage decline in stock market
history
Black Monday (1987)The largest one-day percentage decline in stock market
history
1997 – 98 Asian Financial Crisis
1997 – 98 Asian Financial Crisis
![Page 3: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/3.jpg)
THE PANIC OF
1907Bankers' Panic or Knickerbocker Crisis
![Page 4: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/4.jpg)
attempt to corner the
market on stock of the
United Copper
Company
October 1907
by
Heinze, Moors, Otto & Barney
![Page 5: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/5.jpg)
Fall Effects
Sto
ck
Ex
ch
an
ge
50
%
Pro
du
ctio
n 1
1%
Imp
orts
26%
Un
em
plo
ym
en
t 8%
![Page 6: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/6.jpg)
Later to the downfall of the
Knickerbocker Trust CompanyNew York City's third-largest trust.
![Page 7: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/7.jpg)
who pledged large sums of his own
money, and convinced other
New York bankers to do the same,
to shore up the banking system
J. P. Morgan
![Page 8: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/8.jpg)
Some believed Engineered Panic
Others believed Morgan took advantage of
the panic to allow his U.S. Steel company to
acquire TC&I.
Despite Morgan’s role was significant, but still
he lost $21M, & lots of Criticism & Scrutiny
![Page 9: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/9.jpg)
![Page 10: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/10.jpg)
![Page 11: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/11.jpg)
Black Tuesday & Great Depression
1929 - 1945
![Page 12: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/12.jpg)
Originated in the U.S., after the fall in stock prices
that began around September 4, 1929, and became
worldwide news with the stock market crash of
October 29, 1929 (known as Black Tuesday)
![Page 13: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/13.jpg)
United
StatesGreat Britain France Germany
Industrial
production–46% –23% –24% –41%
Wholesale
prices–32% –33% –34% –29%
Foreign trade –70% –60% –54% –61%
Unemployment +607% +129% +214% +232%
![Page 14: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/14.jpg)
![Page 15: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/15.jpg)
![Page 16: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/16.jpg)
![Page 17: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/17.jpg)
Keynesian Equilibrium
![Page 18: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/18.jpg)
Great Depression was mainly caused by monetary contraction, the consequence of poor policy-making by the American Federal Reserve System and continued crisis in the banking system
Monetarists, including Milton
Friedman, argue
![Page 19: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/19.jpg)
Irving Fisher, argued
the predominant factor
leading to the Great
Depression was over-
indebtedness and
deflation
Paradoxically, the more the debtors paid, the
more they owed.
![Page 20: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/20.jpg)
Decline in productivity
the decline in productivity that caused the initial
decline in output and a prolonged recovery due to policies that affected the
labour market
Kehoe
& Prescott
![Page 21: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/21.jpg)
Breakdown of
International
Trade
the sharp decline in international trade after 1930 helped to worsen the depression, especially for countries significantly dependent on foreign
trade
![Page 22: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/22.jpg)
the unequal distribution of wealth throughout the 1920s caused the Great Depression
Inequality
Economy Produced more, consumed less due to less income by masses;
![Page 23: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/23.jpg)
![Page 24: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/24.jpg)
Abandoning the Gold Standard
![Page 25: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/25.jpg)
![Page 26: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/26.jpg)
WW II – Industrial Revolution &
Employment Opportunities
![Page 27: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/27.jpg)
Black Monday (1987)
The largest one-day percentage decline in stock market history
![Page 28: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/28.jpg)
Black Monday refers to Monday, October 19, 1987,
when stock markets around the world crashed,
shedding a huge value in a very short time.
![Page 29: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/29.jpg)
Market Falls
45.50%
Hong Kong
26.5%
UK
41.8%Australia
31%
Spain22.8%
USA
60%New Zealand
![Page 30: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/30.jpg)
![Page 31: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/31.jpg)
Program Trading
![Page 32: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/32.jpg)
Illiquidity
Overvaluations
![Page 33: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/33.jpg)
1997 Asian Financial Crisis
![Page 34: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/34.jpg)
Thailand Economic Bubble &
Hot Money
![Page 35: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/35.jpg)
![Page 36: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/36.jpg)
Fixed Exchange Rates
![Page 37: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/37.jpg)
Foreign Exchange Risk
![Page 38: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/38.jpg)
Increase in Interest Rate in US
This made US more attractive market for Investment, compared
to, in pegged Asian currencies While US made it much more
attractive for HOT MONEY
![Page 39: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/39.jpg)
Highly Leveraged Societies
![Page 40: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/40.jpg)
![Page 41: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/41.jpg)
Solution
![Page 42: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/42.jpg)
![Page 43: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/43.jpg)
ECONOMIC REFORMS
![Page 44: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/44.jpg)
Asian Crises & Malaysia
![Page 45: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/45.jpg)
Pre-Crisis Malaysia
The KLSE Composite index was above 1,200
Before the crisis, Malaysia had a large
current account deficit of 5% of its GDP
The ringgit was trading above 2.50 to the dollar
The overnight rate was below 7%
![Page 46: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/46.jpg)
Crisis Effects on Malaysia
The KLSE Composite index declined to 600
The ringgit went to 4.57 to the dollar
The overnight rate jumped to 40% from 7%
![Page 47: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/47.jpg)
![Page 48: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/48.jpg)
Ringgit – Dollar Pegging
![Page 49: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/49.jpg)
![Page 50: World Financial crises In context of Malaysia](https://reader033.vdocuments.site/reader033/viewer/2022052509/55a8a1c71a28ab4b718b46bd/html5/thumbnails/50.jpg)