Over the past few weeks investors have been bailing out of the major Asian markets faster than Jimmy Connors's tenure as a tennis coach. As Thailand released its 2013 second-quarter growth figures, which revealed the country had fallen into a technical recession, investors have been selling off Thai bonds and getting out of the Bangkok stock exchange. In India the rupee has hit new record lows against other currencies as the country has been reporting enormous current-account deficits. In Jakarta, Hanoi, and even in more stable Asian economies such as Singapore and Malaysia, similar outflows of capital are mounting, exacerbated by the U.S. Federal Reserve's hints that it may slowly end the period of quantitative easing, marking the worldwide end of cheap credit.
For some analysts, and even some Asian leaders and officials, the massive selloffs, and the reasons behind them, are eerily reminiscent of 1996-97, when money flowed out of Asian economies and speculators attacked one Asian currency after the next, triggering a regionwide financial panic. As in the mid-'90s, many Asian nations today are running massive current-account deficits and have ridden long booms of cheap credit, both at home and in global markets, to build endless housing and industrial developments. With domestic credit become tighter, and the Fed's tapering of quantitative easing, that credit boom will end. Many Asian nations now face historically bad debt-to-GDP ratios: In Japan the debt/GDP ratio has climbed to 170 percent, while many economists believe that if China's true debt figures were released, it would have a debt/GDP ratio of more than 200 percent.