Contagion!

WHEN foreign speculators ganged up on Thailand's currency in February, and later turned on its Southeast Asian neighbours, the spreading crisis was popularly dubbed the "Tom Yam effect". That label, derived from the spicy Thai soup, seemed apt at the time. No longer.

Andrew Maule, an analyst with Vickers Ballas, says the economic contagion now gripping most of Southeast Asia has gone way beyond hurting regional currencies. It's now threatening entire economies and has cast a shadow of doubt over whether the 'Asian Miracle' economies that strutted their high growth rates had turned into an Asian Myth at the hands of the likes of philanthropist-speculator George Soros, Goldman Sachs, and JP Morgan.

Canny speculators in the Sorosled pack smelt blood in the weak economic fundamentals of Thailand, whose exports were negative last year and where huge foreign loans had been frittered away in unnecessary investments. Underneath all its bluster, this Asian Tiger was actually very ill. As speculators called Thailand's bluff, the Thai government put up a desperate defence, using its dollar reserves to buy the baht and shore it up. On July 2, with almost its entire forex reserves wiped out, it surrendered. The baht fell 40 per cent.

Aghast, companies, with some $75 billion in foreign debt, saw their loan repayments soar, since the dollar was now far more expensive. More than a million Thai workers—both white and blue-collared—could lose their jobs this year in a crisis where stockbrokers have turned taxidrivers, bloody street protests could erupt, and the government might fall.

After Thailand, speculators zeroed in on Malaysia, Indonesia and the Philippines. All had enormous current account deficits—cash outflow from the country minus cash inflow—of up to 8 per cent of GDP. The currencies slid. Even the mighty Singapore dollar and the Korean won took hits. Satian Tantanasarit, vice-president, Thai Danu Bank, warned last week that the currency crisis could spill over into China. Thai deputy prime minister Virabongsa Ramangkura, went further: "If the US does not support the creation of an Asian Monetary Fund on the lines of the IMF, then the US could itself be affected by the crisis." The tigers are on the run.