Contagion Speed
Global EM risk-off
Lehman Brothers collapsed on September 15, 2008. Within 72 hours, emerging market currencies worldwide were in freefall — not because they had exposure to American mortgages, but because global investors needed to raise dollars to cover their losses. They sold everything that wasn't nailed down: Brazilian stocks, Turkish bonds, Korean equities. The selling wasn't discriminate; it was pure panic. Currencies that had nothing in common economically moved in lockstep because they shared one thing: they weren't dollars.
When investors panic they do not stop to check whether Indonesia and Brazil actually trade with each other. They sell everything that feels like the same kind of risk. Emerging market. Dollar debt. Current account deficit. The mental category matters more than the economic reality. This is why crises spread faster than any fundamental analysis predicts — the contagion map is a map of human psychology drawn in currency prices.