Could we see a replay of 1997?
ASIA is still traumatised by the great financial crisis of 1997, when Thailand's devaluation of the baht set off a region-wide collapse in markets. Could it happen here again?
The mere question will strike many as odd, given Asia's rapid growth and progress in strengthening financial systems, improving transparency and the amassing of trillions of dollars of currency reserves.
But Asia now faces three risks that could quickly undo those gains: Federal Reserve tapering, a Chinese crash and an explosion of household debt.
The danger of the Fed pulling too much liquidity out of markets has been well documented. So have China's rising vulnerabilities. Debt, though, deserves far more scrutiny.
As economists survey the scene, Thailand once again tops the worry list. Debt there has risen rapidly, underwriting standards appear loose and non-performing loans are rising.
Thailand has plenty of company in Asia, Oxford Economics warned in a new report.
Financially conservative Singapore has seen credit growth in the last six years exceed that of the United States in the run-up to its 2008 subprime meltdown. Several regions now have private-debt ratios of between 150 per cent and 200 per cent of gross domestic product. They include the higher-income set - Australia, Hong Kong, South Korea and Taiwan - as well as China, Malaysia, Thailand and Vietnam. Even where debt levels are lower, Indonesia and the Philippines, the trajectory is troublesome.
"Debt surges of this kind often end badly," said Oxford economist Adam Slater.
Even more worrisome than the absolute levels of debt, says Frederic Neumann, Hong Kong-based co-head of Asian economic research at HSBC Holdings, is the pace of increase.
For all its rapid growth and buoyant markets, Asia isn't as healthy as it appears on the surface, and might take on even more debt to support growth. As leverage exceeds the peak before the 1997 crash, is a sharp correction on the way?
All this fresh debt leaves Asia highly exposed to financial shocks and economic shifts. Any destabilising event could push Asia back to the brink.
What should governments to avoid disaster? "It's all about productivity growth," Neumann said.
"If it slows, profits come under pressure and there's a tendency to leverage up to maintain returns on equity, so anything that boosts productivity growth, really. For example, state-owned enterprise reform, infrastructure, less labour market rigidity and trade liberalisation."
Few of these upgrades are afoot. Certainly not in Thailand, where the generals who seized power on May 22 are too busy consolidating power to restructure the economy. Ambitious talk of change in Hong Kong, South Korea, Malaysia and elsewhere hasn't been met with noticeable action. And the real worry, of course, is China.
China's unprecedented stimulus binge after Wall Street's 2008 reckoning supported growth throughout Asia. Beijing's epic largesse could come back to haunt the region if growth slows sharply, or giant debt defaults slam world markets. The same goes for the Fed's quantitative easing programme.
Ultra-low US rates pulled tidal waves of capital Asia's way, helping to facilitate a surge in private-debt ratios. But Fed policies and China's growth engine risk are now shifting into reverse.
Thailand's implosion was only the most spectacular example of Asia's propensity for boom-and-bust cycles since the late 1990s.
Granted, Asia is still among the world's least-ugly economic regions.
Also, stricter loan-to-income ratios and robust "macroprudential" policies such as taxes and regulations that limit money flows could save Asia from revisiting the depths of 1997.
But, Mr Slater warned, "the risks from the debt build-up look sufficient to call into question the much-touted trend of the rise of the Asian consumer".
That would be bad news for everyone.