Economists tend to say that markets have short memories, in an attempt to explain why, seemingly, markets do not apply large enough discounts to some asset prices even after episodes of turmoil. However, economists typically ignore the fact that they also seem to have short memories and that, often, simplification prevails over careful analysis. A clear example is the ongoing commentary bashing Asian countries for a variety of assorted reasons: adopting mercantilist policies, having learnt the wrong lessons from the 1997 crisis, risking heavy capital losses from their exchange rate reserves, managing their currencies, self-inflicting standard of living costs, etc. While this commentary is largely the result of the fashionable discussion on the global imbalance, and while this is a very convenient way of providing arguments for politicians so that they can tackle, in a partial, biased and inefficient way, the problem of rising income inequality in the Western world, the truth of the matter is that few people seems to remember the conclusions of the post-crisis analysis back in 1997-98 and the policy implications of such conclusions. Ten years later, the Asian crisis feels like a very old event and memories seem to be blurring.
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