Globalization has been the theme directing the future. Yet, as Mr. Henry M. Paulson, chairman and CEO of Goldman Sachs Group Inc. recently acknowledged, national and regional markets are linked only in “precarious ways” leading to weak spots within the economy and fueling the possibility for regional or even worldwide financial crises (Peck Ming, 12/8, p.1). In just the past 12 years, three major crises have caused tremors felt around the world. All three examples represent incidences of contagion, or “the interaction between financial sector crises and balance-of-payments crises in which a loss of investor confidence may set off vicious cycle of capital flow reversals, a liquidity squeeze and a depressing currency” (Internet 2, p. 2). And all three help illustrate the need for a remaking of the international financial architecture in order to prevent future occurrences of contagion (Garten, 1/29, p. 1).
Contagion no doubt remains a fuzzy topic for which ...