The recent sudden rise in market volatility proves that rating agencies and investors are horrible at detecting the early warning signs of trouble, says economist Nouriel Roubini of New York University.

“Ratings agencies wait too long to spot risks and downgrade countries, while investors behave like herds, often ignoring the build-up of risk for too long, before shifting gears abruptly and causing exaggerated market swings,” he writes in an article for Project Syndicate.

“Given the nature of market turmoil, an early-warning system for financial tsunamis may be difficult to create; but the world needs one today more than ever,” he said.

“Few people foresaw the subprime crisis of 2008, the risk of default in the eurozone, or the current turbulence in financial markets worldwide. Fingers have been pointed at politicians, banks, and supranational institutions. But ratings agencies and analysts who misjudged the repayment ability of debtors – including governments – have gotten off too lightly,” he wrote.

Given the problems with ratings agencies, investors and regulators recognize the need for a different approach. Investors have tried to identify good alternatives – and have largely failed, he wrote.

“An assessment of sovereign risk that is systematic and data-driven could help to spot the risks that changing global headwinds imply. To that extent, it provides exactly what the world needs now: an approach that removes the need to rely on the ad hoc and slow-moving approach of ratings agencies and the noisy and volatile signals coming from markets,” he wrote.

And while the recent turmoil in financial markets has led some commentators to warn of a global crisis, but Ambrose Evans-Pritchard, international business editor of The London Telegraph isn't so sure.

"It has been a frightening summer," he acknowledges. China's economic growth has slowed to 3 to 5 percent, economists estimate; its stocks have dropped 40 percent since June 12; and its currency has fallen 3 percent since the government's devaluation two weeks ago.

But, "in the end you have to make a judgment call on whether this tangle of cross-currents in the world economy really is the start of another wrenching global crisis, or just a tremor," Evans-Pritchard writes. "This time I refuse to join the pessimists."

He says U.S. economic growth is accelerating. It registered 3.7 percent in the second quarter. And "Germany is rock solid."

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