1. Are there any hidden assumptions in the country or countries that might inhibit market
force indicators from revealing the true economic health of the country?
In order to infer that a country may have certain market force indicators it is important to
consider all currency crises, financial crises, foreign debt crises and banking crises. When
looking at currency crisis there were two different examples within the US, these took place in
1971 and 1973. Another currency crisis that occurred happened in 1992-93 in Europe, this was
the new establishment of the Euro. Financial crises are also another disruption to consider, in the
US there was a crisis in the 1980s which changed the way monetary policy works, this caused
interest rates to rise. There was a financial crisis in Southeast Asia in 1973 which caused strong
capital overflows. In the early 2000s the technology stock market bubble burst in the US, which
affected overseas economies. In 2007 a real estate crisis hit the US, this spread to global
investors who purchased the mortgage debts. Foreign debt crises occurred in 1982-84, this
caused emerging market economies to forgo paying off foreign debt, this led to foreign debt
defaults and bank loan write-offs, as well as loan restructurings and foreign debt swaps. In 1997
the Asian financial crisis caused foreign debt restructurings. The final type of crisis to consider is
a banking crisis, these occurred in the 1980s in the US, this led to high interest rates and failure
of 1/3 of US banks. This also occurred in the 1990s in Japan, the government had to rescue
Japanese banks they did this by purchasing their substantial nonperforming loans.
All of these crises may cause external pain as well as internal pain, certain examples showed that
other countries took part of the hit when these situations occurred. From the examples explained
