In this paper, we examine the potential causes of the East Asian crisis, and identify the primary cause of the crisis to be a fundamental reassessment of the profitability of investment in the region. A number of secondary shocks are also identified, including interest risk premia, monetary expansion and output declines brought by financial market failure. We use a forward looking modeling framework to capture some of the major interactions between asset markets, output and trade, and find that it is able to capture the main features of the crisis. Policy responses are examined, and temporary fiscal expansion is found to be generally preferable to monetary expansion or to permanent fiscal expansion.
[John Bolton’s statement that the North Koreans “have not lived up to the commitments” made in Singapore] totally cuts Secretary of State Pompeo and the special representative, Steve Biegun, at the knees. What is the incentive for North Korea to actually talk about the meat-and-potatoes of denuclearization with the special representative and with the secretary of state if the national security adviser has said nothing is happening so we have to go straight to the top?