Thus one finds that despite all sorts of problems staring at the freely floating exchange rate system many still steadfastly advocate the same medicine.

The important point missed by such faithfuls is that the freely floating exchange rate system has outlived its utility. Like the Bretton Woods system did in the early seventies. Till 1971, for 25 long years the US dollar had shouldered the burden of keeping the world on a fixed exchange rate system.

It was through dollar that other currencies were pegged to gold which in turn had a fixed exchange rate of US $ 35 per troy ounce (around 31 grammes). But massive US trade deficits and a sharp decline in US gold reserves caused a crisis of confidence. There was no other option for Washington than to suspend its fixed exchange rate withgold.

In contrast, the flexible exchange rate policy that has taken over for the last 25 years has not collapsed all of a sudden. It has one great advantage. It does not depend on one economy to act as a peg of sorts. The special role of the US dollar in the exchange market now is different from what was chalked out under the Bretton Woods system. Thus it did survive the US stock crash of 1987 or the European nightmares of 1992 and 1993. However, the hiccups faced then were no less severe to the US, UK and Germany than what the Asians have been suffering now.

What did the great western think tank then profess to combat the problems? In May 1988 at the International Forex Dealers' meet at Honolulu the major theme for star speakers had been a controlled exchange rate regime. The European Monetary system at that point of time was faring well. It was easy for the European economies to coordinate their policies closely given the economic trend in these countries.

Their friends across the Atlantic were ruingthe fact that US was not participating in any such exchange rate mechanism. In September 1992, when the ERM crisis erupted British pound retreated humiliated. Europe lost its status as an architect of an infallible exchange rate system. And Europe took up its cudgels against the speculators like George Soros et al who, they felt, were the scums on the earth busy creating havoc unduly.

They talked of introducing checks and balances like transaction tax on speculation to stop such unwarranted arbitraging. However, the problem did not last long enough for the developed West to translate its thoughts into action. The next crisis was in Mexico. Luckily, it got confined within the crisis-prone North American neighbour of the US. It also had the full support from its powerful neighbour.

The Mexican bail out was therefore swift. Within a year, everyone forgot about the Mexican peso parody. It was a triumph for the global capitalist system and its institutions like IMF. The experts were happy that theMexican crisis was solved so effortlessly. Forgotten were the experiences of 1987 and 1992.

The Western experts, predictably, felt that the global capitalist system had been a foolproof one and required no second look. They had by now forgotten completely their suggestions in 1987 and in 1992. The Asian crisis, according to them, was due to problems specific in those countries. They diagnosed that it was due to bad debts, weak economic supervision and deep rooted corruption in these countries. The system was not at fault, as it was in 1987 or in 1992. Nor was there any swift support from IMF, World Bank or Uncle Sam. Predictably so.

The major economic power which had massive stake in the region, Japan, was in a shambles. It did not have the muscle to pull the South-East Asian economy out of the morass. With no lender of last resort coming to aid the region their economies still remain badly affected. The current semblance of tranquility may vanish any time. The region, and along with it others like Indiaand China, may collapse at the slightest provocation.

The Fund-Bank-Washington think tank has been insisting on the economies following the old bitter medicine of belt-tightening as a precondition for a bailout assistance. They laughed at the suggestion of having a currency board in Indonesia despite the same coming from an economist from the US' John Hopkins University, Steve Hanke. Interestingly, a similar suggestion from George Soros on the Russian economy did not face such a strong barrage of criticisms. Rules of Western economists are apparently different for different countries despite the circumstances remaining the same. What the Asian crisis has proved beyond any reasonable doubt is that the fully convertible exchange rate system is not good for all at all times.