For those of you who still think that China will pick up the slack were the US left off think again:
Even after Lehman and AIG collapsed a year later — and Europe’s economy crashed into slump — it remained an article of faith in Berlin, Paris, and Rome that this was just fall-out from the Anglo-Saxon casino.
Few understood that the `China Effect’ had engendered credit bubbles everywhere, and that Europe’s variant was even more pernicious because euro-banks were more leveraged, with much greater liabilities, and the structure of EMU concentrated the damage on weaker states with no policy defence against sovereign collapse.
US Treasury Secretary Tim Geithner must have felt a twinge of Schadenfreude as he exhorted EU finance ministers in Poland to rescue their banks or face “catastrophe”. The Germans and Austrians barked back at him, of course, but at least debate is joined.