"A better approach would recognize that default is a natural feature of the market mechanism, not something to be avoided at all costs. But it would seek to limit the costs of sovereign defaults when they do occur."

"It's like a nephew who becomes dependent on a very rich, doting uncle," said William McDonough, who was president of the Federal Reserve Bank of New York until 2003. "Suddenly the uncle dies and leaves the money to someone else, or decides he doesn't love the nephew anymore and cuts him off. You can ask, who's responsible—the uncle or the kid?"

the main cause of Argentina's crisis was the disjunction between convertibility and the policies required to nurture and ensure its viability—in particular fiscal policy. As difficult as it may be to prove how events might have played out differently, Argentina almost surely would have spared itself much grief if it had run substantially more

from 1993 to 1998, Argentina's debt rose from 29 percent to 41 percent of GDP despite the economy's overall splendid health.

"I am a legend," he told a group of foreign investors at a dinner speech in March 2001 shortly before his appointment to head the Economy Ministry. The power of his intellect, his incorruptibility, and the sincerity of his desire for his country's well-being were undeniable; the only question was whether he had a sense of proportion about himself.

Perhaps caution about emerging-market debt will return to the financial markets. At the end of 2004, however, the bulls were continuing to run wild; spreads fell back to record lows after having risen at midyear, and borrowing by emerging-market governments and companies was headed for a new annual high. Whatever happens, global investors have once

In sum, notwithstanding the recovery, Argentina's bust still ranks as globalization's biggest. Although not as directly threatening to international stability as the tensions that have erupted in the Middle East, its implications for America's ability to exercise global leadership are disquieting, as indicated by the political turn the country has

In turn, the national debt would rise from 35 percent of GDP in 2003 to 50 percent of GDP in 2013—the highest since the mid-1950s, when the United States was still paying down the debt it incurred to fight World War II. The projected red ink and increased debt would be even greater in the years thereafter, when the baby-boom generation reaches

The EMBI-Plus tracks on a daily basis the prices and yields of bonds issued by various countries such as Mexico, Poland, South Africa, Malaysia, and Lebanon, which rise and fall based on news developments and interest rate trends.