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the crash synopsis
August 31, 1998 was dubbed "Black Monday." On that day the Dow Jones industrial average plunged 512 points, wiping out a year's worth of gains. World markets panicked. Fear spread that the global economy was facing meltdown.

Unraveling what happened that summer of 1998, "The Crash" examines the underlying dynamics of a global economy that has created this new era of risk and instability. And it draws on the expertise of William Greider, George Soros, Jeffrey Sachs, and other leading financial analysts and policy makers who debate whether--or when--the crash of 1998 will be repeated.

Worldwide, arguments have broken out over who is to blame for the crisis: crony capitalists and weakened leaders like Boris Yeltsin; huge investors who poured money into the world's developing markets with dangerous abandon in the mid-1990s and then panicked; or the fundamental assumptions of the "Washington consensus," as directed by the U.S. Treasury Department and the International Monetary Fund.

mexican traders in a panicCritics say the "Washington consensus"--advocating the free movement of goods and capital for developing countries so they can become successful market economies--fostered vulnerabilities in emerging markets which were an underlying cause of the crisis. So what began as a localized currency and financial crisis in Thailand, roared through the world's economy in 1998, bringing depression to Indonesia, economic meltdown to Russia, and deep fears about what would happen next in Latin America.

In looking at the precarious condition of the global financial system, "The Crash" offers an economic primer for understanding what journalist William Greider calls "a kind of continuing poker game in the sky that most of us never see being played. But the big players-finance ministers, treasury secretaries, leading banks and investments funds-are all playing it all the time."

"The Crash" lays out how this high-stakes poker game revolves around the value of a country's money-its currency-whether the Russian ruble, the Thai baht or the Mexican peso. In today's world of unregulated capital, with more than a trillion dollars sloshing through the world's financial markets daily, political scientist Jorge Casteneda explains, "If investors and speculators decide that you don't have enough money to back up your currency, you've had it."

This report takes a lively look at the world of the speculator with Robert Johnson, formerly the top portfolio manager of George Soros's Quantum Fund; tracks the currency speculators' role in Thailand's meltdown in July 1997 (video clip); and examines the actions of the International Monetary Fund and the U.S. Treasury in responding to the Asian crisis with policies which critics say were too harsh and made a bad situation worse. Finally, "The Crash" examines Russia's crisis the summer of 1998, where many of the dynamics that characterize the world economy in the post-Cold War world come together-and lead to disaster.

In the end, this FRONTLINE report asks, is the worst over, or will it happen again? And what if the U.S. stock market, believed by many observers to be a bubble, bursts?

"If that were to happen before the rest of the world has recovered," George Soros warns, "then you would have a worldwide depression similar to what happened in the 1930s."

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