The panic may be over in global stock markets for now but many observers believe that unless fundamental reforms are addressed it will only be a temporary abeyance.
The world's leading economic powers may have decided to hold a special summit on global economic problems, but without concerted action that may not prove to be enough over the longer term.
The meeting will look at how to calm world stock markets which have been battered by financial crises in Russia, Asia and Latin America. But representatives from emerging markets will also be present. Harvard professor, Jeffrey Sachs, has argued recently that Brazil, South Africa, South Korea and India should be there for starters, as the issues which need to be addressed are broad ranging to say the least.
According to President Clinton the meeting will need to focus on a six-point approach to global economic difficulties. This includes measures to spur growth from US, Japan and Europe as well as easing the debt burden on crippled Asian companies. He has also called for a doubling in World Bank support for "social safety nets" in Asia and the use of $15 billion (£10.1 billion) in IMF emergency funds to prevent the crisis from spreading to Latin America as well as Congressional approval for an additional $18 billion for the IMF. Increased activity by the US Export-Import Bank to support projects in developing countries would be the final prong.
It is likely that global deflation is one issue which will be at the top of the agenda with the possible need for lower interest rates across the world, as well as the policing of international financial markets. There is a recognition that an era where short-term capital flows can move in and out of countries with such ease that they can destabilise otherwise reasonably healthy economies may be coming to an end.
Most analysts now concede that over hasty liberalisation of capital flows is behind much of the problems now being witnessed. It was this which allowed countries such as South Korea and Thailand to over extend themselves with short-term loans from international banks in the early 1990s. Hundreds of billions of dollars poured into those countries and now at the first sight of panic it is rushing out even more quickly.
Malaysia has reacted by making it more difficult to invest short term and to repatriate money, but this may not be the answer. After all, over the longer term, the international banks may not be willing to invest money if they believe they may not have the chance to repatriate it, if things should go wrong. As a result it may be better for the countries involved to focus on banking supervision and limiting the amount of short-term loans they can take on. Alternatively, Chile's approach, where it taxes such loans, may prove beneficial. But even the IMF has said it may take a more liberal view of capital controls than it has in the past.
But whatever happens, for these countries to continue growing and have any chance of catching up with Western health and education standards, the transfer of capital is badly needed. As a result, the world's financial leaders will need to find some way to restore investors' willingness to deal with high-risk countries. This has been shattered this year by debt defaults, counterparty bank failures and the growing risk of capital controls. The indiscriminate withdrawal of investment capital from all emerging markets has led to a credit crunch in these countries. But - as Mr Sachs argues - what may be more important would be to address the failure of the International Monetary Fund (IMF) to stabilise various countries. The IMF is blamed for persuading central banks across the developing world to raise interest rates to incredibly high levels to protect their currencies and keep the confidence of the money markets. But, of course, the markets lost confidence as interest rates ratcheted up.
A massive debt write off which would allow these economies to grow again, as well as much tighter banking regulation, would help - rather than individual bankruptcy proceedings. On top of that there are questions about the IMF's and the World Bank's aid donations.
There is an argument that large parts of the aid should be channelled through organisations such as the Association of South East Asian Nations (ASEAN) or the SADC in South Africa; this was how the most
successful aid plan in history - the Marshall Plan - worked. It would also mean that countries may be more likely to pour money into collective infrastructure and regional co-operation, much the same way as Europe did following the second World War.
Whether the summit will go this far is open to question. But it is clear that it needs to go further than the G7 summit in Birmingham in May. To prevent further turbulence there is now an onus on the western world to think creatively about these issues.
The text of the May summit said Asia's financial crisis revealed potential weaknesses and vulnerabilities in the global financial system and also the serious human and social consequences of such crises when they occurred. But it did not proffer any new cures or ways to approach the problem.
Japan also remains key to improving the entire situation. Bilateral meetings between Japan and China, while welcomed, are unlikely to prove enough. It is also essential, as Mr Clinton said, that Japan reforms its debt-ridden banking system.
A lot now rests on this summit which is likely to take place at the Washington annual meeting of IMF and World Bank early next month. Until then investors are likely to remain cautious and some degree of stock market turbulence remains likely.
