Emerging-market crises have become harder to resolve

Federal Reserve , investors reflexively worry about a crisis in emerging markets. Today it might appear the usual pattern is playing out. On July 27th the Fed is expected to raise rates by another three-quarters of a percentage point. Meanwhile, has run out of foreign exchange, Argentina faces another default and . Look more closely, however, and the world economy has been transformed in ways that mean the nature and consequences of have changed.The archetypal emerging-market crisis was in 1997-98. As the Fed raised rates, pulling capital back to America, Thailand’s currency peg broke, leading to a panic that floored South Korea and Indonesia. It then spread to Brazil and Russia, and to , a Wall Street hedge fund that collapsed. Calm was restored by the Fed and Treasury cajoling American banks to roll over loans, and by the . Three American officials who led the firefighting were dubbed “the committee to save the world”. A decade or so ago there was a faint echo of 1997-98 when the Fed signalled it would tighten policy, triggering a sell-off in emerging markets.