1. If/when the Eurozone collapses, how will that affect countries in the rest of the world, like Canada?
2. What, if anything, can those countries do about it?
I have stopped writing about the Eurozone, but haven't stopped reading. (I read Eurointelligence daily, for example.) There are daily ups and downs, but the trend is definitely down (or rather up, if you are talking about bonds spreads and interest rates in countries like Greece and Ireland). See Ryan Avent, or Mish, for graphs. It seems to confirm my previous pessimism.
There are questions I think are important; and there are questions for which I think I have some useful answers. And those two categories don't always overlap.
I don't have much in the way of useful answers to the two questions above. But I think they are important, and I don't see anyone else asking or answering them. The Europeans are just looking at what's happening in Europe, naturally enough. And most countries outside the Eurozone are so caught up in their own internal arguments that they aren't asking them either. A Eurozone collapse is a much bigger deal than something like the US debt ceiling, for example, but Americans are spilling much more ink on the latter.
So I'm going to ask those questions, even if I don't have good answers. I'm just trying to attract people's attention, hoping someone else may have better answers than these:
1. There will probably be some sort of fallout in financial markets outside the Eurozone. Even if countries like Canada don't hold many (say) Greek bonds, we may be owed money by people who are owed money....by people who do own Greek bonds. There will probably be some sort of fallout in reduced global Aggregate Demand that will reduce demand for our exports. There may be a flight to quality away from the Euro towards the US dollar, and maybe even the Loonie.
2. This is where I really fall flat. We (countries outside Europe) can't fix their problem. What can we do to prepare ourselves for the fallout? The best I can think of is that the Bank of Canada should err on the side of having monetary policy too loose by other standards, in anticipation of that negative shock to global AD and our exports.
Anyone got better answers?
I would hate to look back a year from now, with everybody saying "We should have done XYZ to prepare for the fallout!". So let's ask it now: what is XYZ? If you are convinced that the answer is "nothing", then you can all go back to squabbling about the US debt ceiling.