In 2008, we learned how very interconnected the world economy has become. A bankruptcy at Lehman, a relatively small US investment bank, shook the world financial system. It also plunged the world economy into its worst postwar recession up ’til then.
This interconnectedness is why our economic policymakers would be well advised to pay careful attention to the economic troubles brewing beyond our shores. In much the same way that the 2008 bankruptcy of one of our banks spelled trouble for the rest of the world economy, so too could a debt crisis in Europe or in the emerging-market economies damage our already-troubled economy.
There is reason to be particularly concerned about another round of the eurozone sovereign-debt crisis. Unlike in 2010, when the eurozone debt crisis was centered on Greece, this time around it’s likely to be centered on Italy, whose economy is some 10 times the size of…
