Greece, by contrast, is on the periphery of the global financial system. Few countries have a substantial share of their assets in Greek banks or Greek sovereign debt. U.S. banks, for example, had $5.8 billion in direct exposure to Greece at the end of 2011, roughly the same financial exposure that they had to Israel and a little more than half as much exposure as they had to Finland. In other words, the world hasn't placed enough assets in Greece for default by the Greek government or the collapse of the Greek banking system to have far-reaching global repercussions. Some smaller firms that are less connected to the global financial system may suffer greatly from a Greek default. But these entities pose little threat to systemic stability, as we saw last year when the brokerage fund MF Global failed due to its exposure to European debt without triggering a broader crisis. For larger, more connected firms, exposure to Greece is such a small percentage of their overall asset portfolios that a Greek default is unlikely to cause insolvency. After all, JPMorganChase lost more than $2 billion on a side bet last week, but there was no threat of contagion. What's more, major firms and their regulators have had years to prepare for the possibility of a Greek default, and Greece's creditors have already discounted the value of the Greek debt they hold well below its face value (as much as 90 percent in some cases). There is not much left to lose.
What if a Greek default triggers defaults in Ireland, Portugal, and Spain? Here the situation would be more like the 1997 East Asian crisis, which had a significant impact on Indonesia, Malaysia, South Korea, and Thailand and a moderate impact on Hong Kong, Japan, Singapore, and the Philippines but was a temporary blip everywhere else. Since the crisis struck Asian countries on the periphery of the global economic and financial system, it mostly stayed in the periphery rather than infecting the rest of the world. Similarly, a crisis in Europe's south will be felt most in Europe's south, less intensely in Europe's north, and very little in the rest of the world.
In short, Greece is not Lehman Brothers. Lehman's failure triggered a global crisis because Lehman was at the center of the global financial network. Greece, in contrast, is at the periphery of this network. Global crises don't start in the periphery. While a Greek collapse would certainly be devastating for Greece and some of its neighbors, the rest of the world is likely to escape with minor disruptions to their economies.