That is why politicians and sundry financial gurus from around the world have been calling for a complete overhaul of the world financial infrastructure. The critics also insist that malevolent currency speculators have the power to manipulate entire markets to enrich themselves while destroying the living standards and quality of life of a good portion of the world's population. However, the financial crisis that beset Southeast Asia two years ago, Russia in late 1998 and Brazil just one year ago is not indicative of capitalist failings. In a nutshell, the crisis is merely one of banking and finance. In the late 1980s and early 1990s, investing in emerging markets became in vogue among mutual fund managers and other large institutional investors.
Private capital flows to emerging markets increased exponentially.
Incidentally, the financial and banking sectors of various emerging market nations were underdeveloped and incapable of absorbing such a sharp rise in supply of investment capital in their home markets. When the first sign of trouble appeared, investors liquidated their positions and rushed for the exits. And, therein lies the problem. The amount of capital that left was so large in proportion to the market capitalization of the markets in question, that the strain on the currency was unbearable and degenerated into a full blown currency crisis. I would say both are equally to blame.