The global investment outlook seems to be dominated in most people’s minds by the outlook for Greece. Last week saw the announcement by Lord Wolfson of a prize of £250,000 for any economist who could come up with a workable solution to the orderly break-up of the Euro.

While he did not say the break-up was inevitable, this was certainly the implication and Greece was the focus of his thinking. At the same time, world markets are up and down on any announcement coming out of Europe regarding Greek bail-outs.

Financial historians of the future may well find this puzzling. Even if the Greek economy halves in size, this is still less than one per cent of Europe’s output.

Greece’s problems are unique: the Greek state cannot finance its activities, and tried to conceal its crazy fiscal planning and the consequent rise in debt. It has become clear that it will never be able either to cut or tax its way to solvency.

Italy’s debt, by contrast, peaked in 1994 and the country should have a primary surplus next year. Contagion is unlikely. But this won’t stop markets worrying about it.

The current situation raises, in an acute form, an important issue which has concerned and confused investors in markets since time immemorial. It is one that Keynes, for example, wrestled with for years before coming down decisively on one side.

Should an investor try to predict and anticipate developments in the economy as a whole, and make that the determining factor in his investment approach or should he make long-term commitments to strong companies with good prospects?

Should we view price decline caused by other investors panic over global economic conditions to be a buying opportunity in certain carefully selected firms?

Keynes eventually came down on the side of the latter approach. But this method cannot be employed uncritically. We need to be reasonably sure that the economic storm will not persist indefinitely and envelop the entire world. We also need to be confident that our chosen companies can remain afloat and flourish under the changed economic conditions.

I think we can be reasonably sure that the world is not coming to an end. We have been through major economic crises before and come out the other side.

Take the specifics of the sovereign debt situation to one side and what we are really experiencing is a re-balancing of the global economy between the highly indebted western economies and the highly productive emerging economies, particularly China.

Half of the world economy is unaffected and growing tolerably quickly. The problems mainly lie in countries with debts. They are not going to run out of money. There are many possible combinations of default, monetisation, devaluation, inflation and even austerity, which will resolve their problems.