What a moneymaking machine, so long as the value of the baht relative to the dollar stayed constant. The collapse of the baht, combined with the thin capitalization of Thai financial institutions, left many of them insolvent or at least in trouble. But these economies can right themselves, as the example of Mexico attests. That is especially important to California. Had it not been for the enormous increase in the state's Asian exports and the jobs they supported, California's recession may well have continued into 1995 rather than bottoming out in late 1993.
Japan is much more exposed by trade and investment to Southeast Asia than is the United States.
A further deterioration of the Japanese economy would also reverberate in the United States because of our considerable exports to Japan. American multinational companies derive considerable revenue from Asia. Those whose costs are not simultaneously offset by the decline in the Asian currencies will suffer a hit to their bottom lines. So far, investments in U.S. Treasuries have proved a safe haven for investors seeking stability from the Asian turmoil. So long as this continues, a strong dollar is likely to be an important factor in holding down inflation and interest rates as the economy expands with low unemployment.