ABSTRACT
There have been financial crises for 175 years, at least. At first they had national origin and reach but even in the nineteenth century their shocks were transmitted across countries. By the end of that century, the TransAtlantic cable had been laid and as a result, Britain, France, Holland, Germany and the USA had interlinked financial markets, which moved in parallel, especially at times of crises. At the end of the twentieth century, the Asian crisis of the summer of 1997 brought us back to that world. That crisis originated in Thailand and after spreading across Indonesia, Malaysia, South Korea, leapt across to Russia, threatened to hit Brazil and caused the spectacular troubles1 at Long-Term Capital Management (LTCM) in the summer of 1998. That was the first crisis of the recent phase of globalisation. It led in its turn to demands for ‘new financial architecture’ and much activity by the IMF/World Bank and G7 leaders in the summer of 1998 was directed towards coping with the global crisis.2 As it happened (and this is my reading of the events of October 1998), a small number of interest rate cuts by the Federal Reserve (Fed) calmed the markets and resolved the crisis. While some new institutions such as the Forum on Financial Stability were introduced, the global financial system has escaped any drastic structural adjustment or reform.
