Redwood: Life after the debt crisis

THE EUROZONE

The euro and its troubles have dominated markets and media for many weeks. When people are in a panic about the condition of state finances and EU banks, they sell any risk assets to protect themselves.

Asian shares have been falling as well as European shares, though not so much, despite being far away from the crisis. When people occasionally cheer up about the prospects for the euro, they like risk around the world. These positions are a bit extreme in both directions. While it is true a collapse in euroland would cut export demand for Asian goods, China has embarked on a policy of selling more items to itself. A bad banking crash in the EU would have a bad effect on US banks, but the further from Europe’s shores you go, the less dramatic the impact would be. There can be world...