At the same time, the huge liquidity that has been driving markets may be more apparent than real as a lot of it is really debt. It could disappear at a stroke.
The irony is that 10 years ago, during the Asian crisis, the problem was geographic contagion with problems in one part of the world – Asia and Russia – spreading to other places – Latin America – more on the basis of fear than a rational appreciation of local conditions. Now investors distinguish sensibly between geographies but they may instead fall victim to spillover between different asset classes.
