The global credit crisis has spread to emerging economies. The real worry is that this will have nasty feedbacks into the rich countries.
The global credit bubble of the past 10 years kicked off excess consumption in many rich economies. That was the meal on which the factory economies of Asia fed. In turn, other emerging markets that produced food and energy benefited from the insatiable appetite created by the economic boom of the factory economies.
Now that credit is being removed, however, the world’s leveraged rich economies must rediscover thrift. With consumer and investment demand plummeting, export demand for the products of emerging economies is caving in.
Chinese export growth is rapidly declining. And China will export a part of its pain to others, such as Australia, which supplies it with industrial commodities. Australia, whose exports contain few imported components, cannot re-export its pain. Thus less growth...
