ABSTRACT
After a series of fi nancial crises in the 1990s,1 a period followed with only two major fi nancial crises: in Turkey and Argentina in 2001 and 2002. In neither case did these crises spread to other countries, as had been the case with many of the crises of the 1990s. The lower frequency of fi nancial crisis was to many a sign that efforts by the international community to strengthen the ‘international fi nancial architecture’ (IFA) had been successful. In early August last year large-scale turmoil in fi nancial markets resurfaced, however. With fears of a global liquidity crisis on the rise, central banks joined forces in an exceptional intervention, injecting $120bn of cheap liquidity into banks, hoping to “shore up confi dence in the global fi nancial system” (Milne and MacKenzie 2007). Whether this intervention would prove to be enough to calm nervous fi nancial markets at the time was the “$64bn question” (Tett and Beales 2007). Paul de Grauve commented that although the large-scale bail-out of banks might calm markets here and now, they would likely be “sowing the seeds” for a full-scale fi nancial crisis in the not too distant future (de Grauwe 2007). “The global economy looks resilient enough” now, said The Economist, but warned that the ongoing fi nancial market turmoil might be “a dress rehearsal for the real crisis that will emerge when the economy is in poorer shape” (The Economist 2007: 63).
