Most economists agree on the need to restore confidence of foreign lenders, so that loans will once again start flowing to these countries. The International Monetary Fund recommends governments running balanced budgets and maintaining fixed exchange rates. Second, the strong Moral Hazard problems created by a banking sector that is too closely tied to the government must be addressed. In particular, there are calls to make Asian banks' books more transparent to review. After all, there are both sound and unsound banks.
Foreigners just have a hard time deciding which firms are safe.
Effects on the U.S. Short run U.S. stock market boom , as investors see the U.S. as a safe place to put funds. This drives U.S. stock prices higher. Long run Fewer exports , since our Asia cannot afford our goods anymore. Indeed, our trade deficit has grown to record levels. Reduced growth , since lower net exports means less demand in the economy, and a lower GDP growth.