And, boys and girls, this will be far worse than ours:
Hungary’s forint fell to an all-time low on Monday, and Poland’s zloty slumped to the lowest in five years on plunging industrial output. Half of all loans to the private sector in Poland are in foreign currencies so borrowers face a severe debt shock after the 40pc fall of the zloty against the euro since August.
“We’re nearing the level were things could get out of hand,” said Hans Redeker, currency chief strategist at BNP Paribas.
The mushrooming crisis has already started to spill over into Germany’s debt markets, lifting credit default swaps on German five-year bonds to a record 70 basis points. The gap between French and German CDS spreads has narrowed abruptly for the first time since the credit crisis began.
“Investors are beginning to ask whether Germany is going to have to pay for the rescue of Eastern and Central Europe,” he said.
A report by Moody’s released on Tuesday said the region’s banks were coming under severe stress as the property bust combines with a rising debt burden. “Local currency depreciation is a major risk to East Europe banks,” it said.
There are contagion worries for Western banks that have lent $1.74 trillion (£1.22bn) to the ex-Soviet bloc — split between $1 trillion in foreign loans and $700bn in local currency debt through subsidiaries.
Why do we care? Because our President just signed, effectively blindfolded, a trillion dollar or so spending bill and unless we want to print ourselves into hyperinflation, we’re going to have to borrow the money. But European money markets are going to have their hands full just trying to stave off complete collapse in Europe. Meanwhile, China’s structurally weak economy is slumping on a big drop in the export trade as recession dampens the market for Chinese goods, so they won’t have a lot of cash to buy US debt with. Where do we get the money from for Obama’s big plans?
As I watched the Spendulus wind its way through Congress to the backdrop of increasing job losses and near-bankruptcy of firm after firm, I started to get a gnawing fear in my gut…now, I’m way past that. Crushing poverty is heading our way, and I’m already used to the fact – I hope to retain my job through this economic meltdown, but I’ve already braced myself for the loss of all my material possessions and mentally adjusted myself to a willingness, when necessary, to take any honest work I can find.
There is still that chance that we’ll dodge the bullet, and I’ll be ok with that, too – but, really, the bill for the past half century or more of profligacy here and around the world has come due, and if we want our children and grandchildren to have a shot at liberty and prosperity, we’d better be willing to lose all we have, today, in order to give them a clean slate, tomorrow.
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