A week ago, Mark Carney, chairman of the Financial Stability Board, warned of emerging global consequences of the escalating eurozone crisis. The problem, he said, is contraction of global liquidity.
What he is worried about, apparently, is disruption of the global funding system as continental European banks retrench. In normal times, these global banks serve as funding intermediaries, gathering short term funds from all ends of the earth at one price, and lending them on to other ends of the earth at a slightly higher price. Trouble for these banks means trouble for global credit markets.