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August 23, 2007


Diana Li

I liked this article by Delong and Eichengreen because they were so thorough in their explanation of how and why the Clinton administration were in some ways a success and others a failure. They explain that with the onset of technology and the information revolution, it boosted international trade and capital integration. But also, it increased financial and economic instability. For example, panic can travel faster due to faster communication.
The Clinton administration had to deal with many international crises that they were not prepared for because they were not a result of unsustainable policies. Instead, this crises had political and structural roots. The administration acted by giving huge loans to the countries in financial crisis and this had a huge impact on helping them recover. Overall, the 1990s was one of the most economically sucessful decades in US history.

Monica Shih

Like the previous poster said, this article was very thorough and did a very clear job of explaning why the Clinton administration focused on international monetary and fiscal policy, and how they succeeded. Clinton did not intentionally choose to put more emphasis on the international agenda over the domestic agenda; rather, due to his lack of political clout, he was forced to turn to the international scene to "create his own headlines." When Clinton took office, he didn't have the political majorities in Congress needed to pass domestic reform bills. In a time when falling transportation costs and international trade integrated the world economy, the Clinton adminstration successfully utilized fiscal and monetary policy to boost domestic investment and give aid to developing nations to support growth. The Reagan-Baker budget deficits of the 1980s slowed American productivity and growth, and when Clinton was able to turn the deficits into surpluses, he led America into a long period of sustained economic growth and surplus.

John Janda

I thought that this was a very interesting article that highlighted some of the differences between the Mexican and East Asian crises. Clearly, the fact that the Mexican crisis came first, as well as the fact that the Clinton administration needed NAFTA to succeed for political reasons, influenced the way in which the United States responded to the Mexican crisis as opposed to the Asian crises. The Asian crisis, on the other hand, seemed to have been solved in most part by the IMF (although the United States did heavily influence IMF actions) and caused in part by poor investments and easy credit. It was also interesting to see that the Asian collapse had a bit of a “domino effect” in which the panic spread from one country to another. The authors do a good job of illustrating how moral hazard could have affected the second crisis. Financiers had a bit of an expectation to be “bailed-out” of any emergency due to the fact that the United States had helped out the Mexican government. Clearly, the expectation of receiving help influenced the actions of several Asian countries during the crisis and made behavior more risky.

Justin Fong

I am convinced that it's fair to say that the Clinton administration's monetary and fiscal policies were successful granted their inherited economic conditions. The U.S. experienced a substantial period of expansion and growth, largely due to IMF-led decisions. Althought the IMF tends to be a target for criticisms, the Fund and the U.S. Treasury provided vital loans to those countries affected by the virulent financial crises that hit in the 1990s.
It was interesting to learn that President Clinton imagined his economic issues to fall under the trade and budget deficit arena, rather than the problem of managing capital flows and avoiding threats to international financial stability. The Clinton administration had acted in a predictable manner in supporting free trade, and did not implement a "strong dollar policy." Many saw a weaker dollar as a useful tool in promoting international competitiveness. However, in the short run, the weakend dollar actually hurt the trade deficit and increased the cost of credit.
Overall, the Clinton administration was composed of elite members, but they had "inherited an exploding budget deficit" that left little room to really provide adequate spending towards infrastructure and grant a middle-class tax cut. The feasible goal was to cut the budget deficit in order to lower interest rates and create an environment conducive to economic growth that could be especially shared by the middle and lower classes.

Yelena Vinarskiy

This article describes the Clinton administration’s success in using fiscal and monetary policy to help the world avert a major disaster stemming from the many financial crises of the 90s. The examples of the Mexican and Asian financial crises helped illustrate that in defending NAFTA in Mexico and in helping to shape the IMF response in Asia, the United States was upholding a fundamental belief that liberalization should be both the operating system for and remedy of the globalized market. Throughout the article, the Clinton administration was described as having succeeded in helping the world use market mechanisms to rein in financial excesses and support the “processes of growth and development that pulled more than four billion people past the take-off stage and onto the escalator”. I can’t help but draw parallels with the way that the United States led the world in market reform via the Bretton Woods system after World War II. While the Clinton administration faced an unprecedented challenge to shape the way the effects of global financialization would be handled, we recently learned that the Roosevelt administration had set an example of successful international financial architecture half a century earlier.

Christina Chen

Professor Delong and Eichengreen’s paper does an excellent job of articulating the economic reasons behind Clinton’s political actions regarding international monetary policies. The paper helps delineate what specifically caused America to enter that period of high economic growth that ultimately characterized the Clinton administration era. The paper illustrates how the Clinton administration was defined by crises, specifically the Mexican peso crisis, the Asian financial crisis and the issues of faith and confidence in international monetary and financial system. However, the specifically compelling aspect to this paper is how it not only highlights the economic repercussions to these crises but also examines “the elective affinity between ideas and institutions”. Thus it was interesting to see how as an institution, the Clinton campaign was wholly unprepared to focus on international relations, yet managed to thrive in successfully shaping international economic policies.

Anshul Shah

While one perspective shows that the Clinton Administration was blind to many of the international monetary and financial problems that arose, I feel that there was also quite a bit of burden on the US during the Clinton Administration's tenure because the US was helping many countries to avoid a major disaster as a result of their financial crises. Through NAFTa and the IMF, the US did a great deal to help the rest of the world. American demand at this time was what helped shape the world economy, and overall I think on average the positive aspects of the Clinton Administration far outweight the negative ones. Looking at this time period from a long term perspective, this period played an essential part in shaping the future of the entire world economy. Had the US taken a lesser role in helping to shape and reform the IMF, and to push for greater transparency, the financial rescue of these crisis countries would have taken much longer. While indeed a big part in this had to do with the fact that US aggregate demand was booming, much of the resulting economic growth and surplus in the US had to do with the other countries in the world rebounding from their own financial crises.

Kevin Nakahara

If anything, this article illustrates the sometimes unenviable task the United States has in calming world financial markets, even when crises start abroad. The banking situation in Mexico has long been volatile, to the point where banks open and close within a matter of weeks. The emergence of nearly industrialized nations around the world, like Mexico, where fledgling, volatile financial markets exist meant the Clinton administration had to be proactive in deterring worldwide disasters which could eventually lead to problems at home. Injecting money, like the US and IMF did, was instrumental in doing so. In today's current situation, it seems as if the opposite is occurring, where the subprime housing crisis is threatening the world financial system from the United States on out, and now the US is simply struggling to correct the situation within its own borders.

Kelly  Yang

Professor DeLong and Barry Eichengreen’s article, “From Meltdown to Moral Hazard” discusses how the Clinton administration used of fiscal and international monetary policies in order to manage the financial situation of the 90s. NAFTA was used in order to help resolve the financial crisis of Mexico and Asia by helping Mexicans earn greater wage due to free trade and the IMF for Asia. The article clearly explained how the Clinton administration was able to deal with a financial crises that was based on both political and structural roots. The Clinton administration found countries suffering from financial crises could find relief and aid through huge American loans. Using both fiscal and monetary policies, the administration was able to boost investments in the US while providing aid and growth to developing nations abroad.

Chung Leung

Delong and Eichengreen's article points out that the effectiveness of the Clinton administration's monetary and fiscal policies was limited by a number of obstacles, including financial failures elsewhere in the world and domestic political opposition. However it seems that Clinton was following the beat of his own drum many times, such as his desire for a strong dollar and support of NAFTA. Before I had assumed that the failure of Hillarycare led to the moderate-ization of Clinton's ambitions, but might not be true. I had also assumed before that the NAFTA/Mexican marketization situation in the 90s was done with information holes and lack of insight, but it appears that many experts were onboard, and the problems that arose from the situation from the US side was due to political factions and conflicts of interests, in addition to the political instability of Mexico at the time.

Tushar Kumar

This paper accurately shows the facets of the international monetary system that the Clinton administration overlooked. During his reign, Clinton focused quite a bit on the world economy, possibly sacrificing some American welfare for the betterment of the world's welfare. One thing that was done well was the reduction in the budget deficit. This led to a more healthy and conducive growth possibility for both the US and world economy. What is interesting to note is that like hedge funds today, financiers in the past had some level of expectation to be given aid in a time of crisis.

Mark Wes

Delong and Eichengreen’s article, “From Meltdown to Moral Hazard” outlines how various crises helped shaped the economic policy of the Clinton administration. In particular, I liked how the article went into great depth about the Mexican peso crisis. Clinton’s administration relied heavily on the success of Mexico because of the advent of the NAFTA. When Mexico began to fall into crisis, the U.S. government went out of its way to help them with loans to help minimize the crisis. As Eichengreen and Delong state, “the centrality of the debate over NAFTA had become, by default, one of the administration’s two signature accomplishments” (p.27). I find it interesting that when the Asian crisis hit directly after the Mexican crisis, that the U.S. was not ready to jump to Thailand’s aid as easily as it had jumped to Mexico’s aid. It seems that many of the reasons why the U.S. went to help Mexico, were also present in the crisis in Asia and therefore it would be logical that the U.S. would want to help out more than they did.

Eric Hsiao

Can the IMF do no right?
On the onset it seems that the IMF has been a complete disaster- almost every article/paper/book I have read that touches on the IMF seems to imply that their operation is entirely flawed. With the exception of Kindelbergers Manias Crashes and Panics, it seems to be that a large blunt of the blame of the Asian Financial Crisis was due to the IMF. Delong and Eichengreen’s paper is no exception. Although I was pretty familiar with the big picture view, the paper shed significantly more detail on the Clinton administrations role in handling the crisis. This is the most interesting paper I have read this semester.

Yu (Ray) Zhao

The Clinton Administration has often been praised for its ability to lead the U.S. economy in a positive light especially after the deficit incurred during the Regan Administration. Delong and Eichengreen’s article regarding the Clinton Administration gives confirmation to this sentiment but also includes negative aspects that arose during Clinton’s tenure as president. In terms of the positive aspects, the Clinton Administration was able to help many nations out of economic depression via the issuance of loans. While a lot of this was done as a result of campaigning reasons, it created heavy influences in foreign nations. However, Clinton’s tenure also resulted in a number of mishaps. One of these was the administration’s inability to spur free trade via the strong dollar policy. Overall, the United States during the Clinton era made great influences in the international spectrum, both in terms of economic and political reasons.

Athena Ullah

Delong and Eichengreen make a compelling argument for why the 1990s financial crisis was “sudden, but not surprising”. Through three distinct examples (Mexican Recession in 95’, the East Asian Crisis in 97’, and the crumbling confidence in the international monetary and financial system) the article defines the blurry lines between economic meltdown amongst burgeoning countries, and moral hazard in the developed world. As illustrated, the Clinton administration’s “strong dollar” and domestic policy misleadingly placed emphasis on trade and budget deficits. His administration did so, at the best of managing capital flows or averting threats to international financial stability. His aim was to bring down the trade deficit and keep interest rates low in order to stimulate growth and a strong economy. Their political tools focused on antidumping and trade policies that nurtured foreign markets to open their borders for freer trade. Such is the case for Clinton’s support in the North American Free Trade Agreement in 1992, which called for the phasing out of virtually all barriers on trade and investment flows. However, the policy was s double edge sword for the American economy: on one hand we benefited significantly from cheaper imports but simultaneously our currency appreciated, pricing our exports out of the trading market. As the article posits, the disjointed system, could have been mitigated if the following were not leading our monetary and fiscal policy: 1) The Fed’s ad hoc response to controlling the economy 2) destabilization of capital flows 3) the vulnerability of investment eventually turned into crony capitalism 4) the poor and non-cohesive banking system.

Ryan Smrekar

DeLong and Eichengreen clearly and concisely describe the motives behind the Clinton Administration’s focus upon international politics and the problems which they faced. It was interesting to read about the specifics behind the Asian markets crashing and the rescue of the Mexican economy. The fact that Clinton focused so heavily upon the international sphere was a result of him not having Congressional support to facilitate his domestic agenda. Thus, he turned to the International arena to make some headway and accomplish some defining tasks for the administration. Holding together the seemingly fragile monetary system by utilizing the IMF was a huge accomplishment, as growth in the emerging markets and advancing economies was only sporadically affected. Clinton’s administration was also in power at the time when the internet was becoming not only a global phenomenon, but a new tool for foreign exchange and a revolutionary piece of technology.

Luke Brennan

This is one of the most interesting papers I have read for this class. Most aspects of the article have already been commented on, so I'd like to bring up what I thought were interesting parallels between the attitudes of the 1990's and those that existed in the late 1920's. As I remember, it was Irving Fisher who commented on the economy right before the 1929 crash, saying that it had reached a permanently high plateau. The feeling was that the economic issues of yesteryear had been solved, and that things would now run smoothly - the same sentiment that seems to have prevailed in the 1990's. The Mexican and Asian crises proved that economists still have quite a ways to go. I also saw a parallel in the reactions to the events of the 1990's and the 1930's. Hoover and the FED intended that the FED would not act as a lender of last resort, although doing so would have greatly eased the pressure on the financial system. Instead, it wished to punish banks that had made bad loans, thereby purging the system. In the 1990's, there was great concern over rescuing currencies that were in distress, and the reasons seem similar. Those who talked of Moral Hazard warned that Mexico needs to bear the brunt of its financial follies, so that future countries would learn a lesson, and not assume that they will be bailed out. Fortunately, Clinton did not heed their advice. However, perhaps the analogy is a shallow one - maybe arguments against currency bailouts are more well-informed than the arguments of the 1930's against bank bailouts.

Ji Y Lee

Clinton administration's economic administration was dominated by a deficit. The article touches upon the Asian Financial Crisis and the role of IMF in it. When the crisis hit Asian countries, the IMF stepped in to provide loans and relief for the affected economies. I don't think the IMF was to blame for the Asian Crisis because they were there to step in when it happened. Without the IMF these countries would have been left on their own for economic recovery. Which would have been a slow and long process, prolonging the damage on the economy, leading to great drop in currency rates and employment rates. With economic aid, the economy can recover with a safe of mind, all they need to do it pay back the loans over time. which most countries did years after the crisis.

Hoi Kwan

This article was highly intriguing in that it discusses how the Clinton administration used of various fiscal policies to handle the problems posed in the 1990s. In order to help resolve the financial crisis of Mexico and Asia by helping Mexicans earn greater wage due to free trade and the IMF for Asia. Clinton's administration used international loans to help alleviate a majority of the financial problems that these countries faced.
This article well balanced in that it also brought to light the downside of the financial strategies employed by the Clinton administration; even though it managed to kill the deficit (exacerbated during the Regan Era). A appreciated dollar siginificantly reduced America's exports; although as a consumer culture we greatly benefitted from it.

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