Italy's Share of Global Sovereign Debt: 5%

All those dire headlines about Italy suggest a region so out of control that the domino effect could bring the rest of the world down. "Italy debt crisis deepens," "Berlusconi's Exit Does Little to Calm Fears," "Why Everyone Is Panicking." Do those headlines lack perspective? Typically left out of news bulletins is any mention of the tremendous gap between Italy -- the third-biggest national debtor in the world -- and the top two: the U.S. and Japan. Italy's GDP is just a bit bigger than California's.

With Italy, the greatest fear is contagion, that bond investors will drive up borrowing costs to unaffordable levels and then do the same to such other indebted countries as Spain. To gain perspective, consider how the Asian panic of the late 1990s eventually engulfed Russia and Brazil; countries accounting for more than 7 percent of global gross domestic product had to be bailed out by the rest of the world. Today, by comparison, the most troubled countries in Europe -- Ireland, Italy, Greece, Portugal and Spain -- make up just over 3 percent of global GDP.

The S&P 500 dropped about 20 percent at the height of the Asian crisis in 1998, which had spread well beyond Asia. The index dropped by about the same amount this past summer in reaction to trouble in Europe. The real problem is less about Italy than about Europe, which -- if it were to suffer deep recession -- would affect export markets and hurt the U.S. economy. Ultimately, either the euro zone reforms radically into a true fiscal and monetary political union or it breaks apart. As always, making financial bets on political outcomes is dangerous.

Click here to read the full report: "A Little Perspective on Italy, Please"