East Asia: more panic to come

The financial world will feel better now Korea has got most of its foreign debts rolled over. The bankers who lent Korea the money in the first place declare they have solved the Korean crisis ­ a mere momentary liquidity squeeze ­ and the Asian crisis along with it. The world may believe them for a short while (though it's ironic it should grant credibility to bankers ­ it was their stupidity that let the crisis happen).

But I don't believe the crisis is over. That's because the emerging-market crisis is global and will hit earnings of big multinational blue chips. Trade figures showing how little of rich countries' GDP depends on exports to the emerging markets disguise the ugly truth. Most international business done in emerging markets is produced there and then sold to the new middle classes in these countries at prices way above those prevailing in the...