Jan

28

Contagion, from Paolo Pezzutti

January 28, 2013 |

Discussions and analysis about financial contagion are not attractive nowadays. "They" have found out that risk complacency is more remunerative as there will always be the political will to "sustain" the system. Whatever it takes.

A commenter writes: 

The paper you linked to deals with financial contagion. What about politico-financial contagion? I'm thinking about what happens to the markets if Iran turns around in June, say, and explodes a nuclear device somewhere in the Indian Ocean. Do the markets panic? To the same degree? While the idea may strike some as a wild hypothetical, the reality is that such a scenario may yet come to pass, perhaps this year perhaps next year. There are many types of contagion (pity those traveling through De Gaulle on the bio front), and for the markets, it may not much matter which one is the triggering event. Complacency isn't limited to financial affairs, even if there may be a financial dimension to the outcome.


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