It all began in Thailand. The Asian tigers seemed to be roaring along and the beautiful, balmy country was out in front after 10 years of spectacular growth averaging 8 per cent a year.
But then in late summer came a run on the Thai baht, which was tied to the US dollar. The dollar link was broken when the Thailand central bank could not find enough dollar reserves to sustain it and the currency plummeted 40 per cent in a matter of weeks. Capital began to flee and suddenly the good times were over for the cheerful Thailanders.
The government turned to the International Monetary Fund for a rescue package in August valued at $17.2 billion. In return, it had to agree to an austerity package involving sharp cuts in public spending and increases in consumer taxes.
The crisis exposed a basic flaw in the Thailand miracle which was to be quickly revealed as common to many other south-east Asian countries. Cheap foreign funds which poured into the country had triggered a spending spree which had spun out of control, with over-investment especially in real estate. With the collapse of the baht, the world's investors, who had found south east Asia's region of spectacular growth attractive because of the prospect of high returns and low risk, were suddenly running scared.
Private investment into the region, mostly from the US and the EU, had reached a staggering $245 billion, and Asian banks had been doling out huge amounts to fund ambitious development projects. However, the growth had been accompanied by poor lending standards, weak supervisory regimes, patronage of well-connected developers, grandiose structural schemes and inadequate capital throughout the region.
The fund managers in London and New York began pulling out their dollars, not just from Thailand but from the whole region. Currencies plummeted. Scaffolding came down from half-finished buildings. Stocks crashed. Millionaires suddenly found they were debtors. The banks found themselves with massive bad debts as debtors found themselves unable to pay back dollar loans.
Next it was Indonesia's turn. With the big investors pulling out, it too had to negotiate with the IMF for a $40 billion foreign currency aid package. IMF negotiators focused on the banking sector and forced the closure of the weakest of the country's 240 banks. The contagion spread to Malaysia, which had also enjoyed a decade of 8 per cent annual growth, and now saw its currency and stocks fall through the floor.
The country's outspoken prime minister, Dr Mahathir Mohamad, was furious, and blamed international currency gamblers like Mr George Soros. Malaysia did not turn to the IMF, but fund officials are watching it closely as the country most likely to need a bailout in 1998. Its growth rate next year will probably be halved to 4 per cent.
Throughout the financial and stock market crisis this autumn a smoke haze blanketed most of south-east Asia, adding to the misery. The cause was the burning of forest by loggers and planters in Indonesia. The traditional courtesy in diplomatic relationships among the region's nations was strained to the limits. For many days on end the haze exceeded danger levels in Kuala Lumpur and Singapore. El Nino was blamed for dry weather which delayed monsoon rains, but there is no guarantee the same will not happen next year.
Hong Kong and Singapore survived the financial crisis best, but by late November it was clear that the strongest and proudest tiger of all, South Korea, was in desperate trouble. It had borrowed heavily in dollars to fund bank loans to favoured industries. As the Korean won collapsed, Seoul found itself unable to repay short-term international loans. Having worked its way up through manufacturing to become the world's 11th largest economy, South Korea had to swallow its pride and turn to the IMF for the third and biggest rescue package, this time to the tune of $55 million.
By now the world was really sitting up and taking notice, especially as South Korea's fall from grace coincided with the spectacular crash in Japan of its fourth largest securities firm, Yamaichi Securities, and the closure of a number of other Tokyo financial houses.
The Japanese financial sector seemed to be collapsing under the weight of non-performing loans, and the yen fell to record lows against the US dollar. Yamaichi's demise was triggered by the discovery of concealed losses, and more Japanese institutions may be carrying the same burden. But Tokyo is on the way to big-bang deregulation, and seen in that context the crisis is one of readjustment rather than Armageddon.
The year ended with the question: could the Asian financial turmoil lead to a major international economic crisis in 1998? The answer given by close observers is "Probably not". Most economists expect the region to rebound, though the domestic medicine will be painful for a couple of years. The worst case scenario is if Japanese banks sell their US Treasury bonds, pushing up interest rates in the United States and eventually slowing US growth - which in turn would make things worse for Asia as its largest export market dries up.
The competitive depreciations of Asian currencies have at least boosted their exports. China, which escaped the currency speculation because the yuan is not convertible, is unlikely to follow with a depreciation of the yuan as happened in the mid1990s. It has a huge trade surplus with the United States and the country is awash with US dollars. The pressure is to revalue upwards.
US Federal Reserve chairman, Alan Greenspan, forecast at year's end that the Asian crisis would slow growth around the world, but that the Asian economic crisis would soon pass. The head of the IMF, Michel Camdessus, said after the South Korean bailout that the Asia miracle was not over and would continue into the next century if countries took strong steps to prevent future crises.
The five months of turmoil have stilled the voices promoting "Asian values" - in so far as the concept was used as a cover for corruption and lack of transparency and individual rights. Privately, western economists concede that Malaysia's prime minister has a point when he complains that a system which allows speculators to move in for a kill and destroy confidence should have more built-in safeguards.
One effect of the turbulence has been to provoke a fundamental reassessment of the link between open markets and economic security. The crisis gave a special urgency to the ninth Asia-Pacific Economic Co-operation forum in Vancouver in November. The 18 nations concluded in their communique that "the fundamentals for long-term growth and prospects for the region are exceptionally strong".
For one blighted country in the region, the prospects are bleak. North Korea, hit by the loss of aid from the now-defunct Soviet Union, two years of flooding and a drought followed by a typhoon, is now unable to provide its people with enough food to live on. Over two million children are malnourished. Many are dying.
International aid is providing some relief, but when the harvest food runs out in March the crisis is likely to become acute. The border between the two Koreas remains the world's only Cold War frontier. Only at the end of 1997 did the two governments, along with China and the United States, begin talking about talks to draw up a peace treaty.
If that is achieved, the way will be open to more aid from the south. But the fate of North Korea's 22 million people will be one of the big world problems of the new year.