The US financial crisis was caused due to the credit crunch resulting from subprime mortgage failure. The shortage in credit created problems in the finacial sector, and this overall has been influencing econmies in other countries. Over the past years, Asia and US are closely connected by trade and investments and as the finacial crisis grows, it has been causing problems in Asia.
Major countries in Asia are planing to speed up a US $80 billion currency swap scheme to minimize the effect of the US financial crisis. In May, East Asian finance ministers agreed to create this Asian monetary fund, and about 80% of the fund will be provided by Japan, China and South Korea. This $80 billion fund would be provided to asian countries with financial emergency.
The curency swap scheme is interesting as it is different from how the economies in Asia choose to handle this situation, instead of increasing money supply. A reason for this might be due to the relatively weak currency in majority of the Asian countries.
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