Asia's financial crisis has quickly become a global one. Its implications far transcend purely economic or financial considerations. In fact, the crisis that began with the fall of Thailand's Baht in 1997 now embraces the entire world and has caused governments to fall in Asia and Russia. To understand the dynamics of the crisis and its consequences for U.S. security, the Strategic Studies Institute and the National Bureau of Research on Asia organized a conference in Seattle, Washington, on June 9-10, 1998. At that conference Professor Sheldon Simon presented this paper. He outlines the impact of this crisis on the security of Southeast Asian governments and armed forces. He assesses how this situation is affecting defense cooperation in Southeast Asia, the prospects for defense modernization in a constrained environment, and the need for the United States to find new modalities by which to achieve its regional security goals. He also underscores the connection between healthy economies and governments on the one hand and between those features and a robust national and regional defense capability. Precisely because this crisis will be of long duration and have a profound international impact, Asian security in the future will clearly be unlike what it has been in the past. Therefore it is essential that we keep abreast of the great changes taking place in this critical area of international security and provide solid analysis of how the situation will affect international security in Asia and elsewhere.