Commanding Heights

3158 WordsSep 28, 200813 Pages
The purpose of this paper is threefold, first to provide a synopsis of the third episode of the PBS video ‘Commanding Heights’, second to assess the success or failure of NAFTA and its implications for U.S. economy and in the future., and thirdly to explain the three most important issues faced by the WTO and the World Bank. SYNOPSIS The third episode of the Commanding Heights series is titled “The New Rules of the Game” and examines the growth of globalization from the 1990’s through today. Globalization, which moved to a grand scale in the 1990’s, has ushered in the greatest expansion of trade in world history. This unprecedented level of trade provides many opportunities for wealth, but also creates crises which had not been…show more content…
The contagion finally hit South Korea in December of 1997, merely 5 months after the downfall of the Thai economy. Korea, like Mexico was given a huge bailout, the largest in history of $55 billion. This move ended the contagion in South East Asia, but left a wake of despair as poverty once again grew in these developing Asian countries. Although the contagion in Asia was over, it had not yet started in other parts of the world. The crisis would hit Russia next, as investors envisioned low risk for an ex-super power with lots of atomic weapons. The investors reasoned that rich countries would surely bail out Russia to avert instability if a financial crisis arose. The investors were wrong; Russia defaulted on its loans and there was no bailout from rich nations. The sentiment within the investor community now swung from one of high risk tolerance to high risk aversion. The crisis would head to America next, when little know hedge fund LCTM (Long Term Capital Management) neared bankruptcy. LCTM controlled $100 billion in assets and was involved in all markets world wide, including Tokyo, Singapore, London and Hong Kong. The decline in these world markets caused losses in LCTM to spiral downward. Contagion had now come to Wall Street. Since LCTM was a private fund, the government could not bail them out. Fortunately, U.S. banks stepped in and saved LCTM, averting disaster. The
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