Eastern European Economies About to Explode in a Chain Reaction of Debt Defaults

[Crewleader]

Economics / Recession 2008 - 2009 Feb 16, 2009 - 06:34 PM

By: Mike_Whitney


Eastern Europe is about to blow. If it does, it could take much of the EU with it. It's an emergency situation but there are no easy solutions. The IMF doesn't have the resources for a bailout of this size and the recession is spreading faster than relief efforts can be organized. Finance ministers and central bankers are running in circles trying to put out one fire after another. Its only a matter of time before they are overtaken by events. If one country is allowed to default, the dominoes could begin to tumble through the whole region. This could trigger dramatic changes in the political landscape. The rise of fascism is no longer out of the question.

he UK Telegraph's economics editor Edmund Conway sums it up like this:

"A 'second wave' of countries will fall victim to the economic crisis and face being bailed out by the International Monetary Fund, its chief warned at the G7 summit in Rome....But with some countries' economies effectively dwarfed by the size of their banking sector and its financial liabilities, there are fears they could fall victim to balance of payments and currency crises, much as Iceland did before receiving emergency assistance from the IMF last year." (UK Telegraph)

Foreign capital is fleeing at an alarming rate; nearly two-thirds gone in matter of months. Deflation is pushing down asset prices, increasing unemployment, and compounding the debt-burden of financial institutions. It's the same everywhere. The economies are being hollowed out and stripped of capital. Ukraine is teetering on the brink of bankruptcy. Poland, Latvia, Lithuania, Hungary have all slipped into a low-grade depression. The countries that followed Washington's economic regimen have suffered the most. They bet that debt-fueled growth and exports would lead to prosperity. That dream has been shattered. They haven't developed their consumer markets, so demand is weak. Capital is scarce and businesses are being forced to deleverage to avoid default. All of Eastern Europe has gotten a margin call. They need extra funds to cover the falling value of their equity. They need a lifeline from the IMF or their economies will continue to crumble.

http://www.marketoracle.co.uk/Article8925.html

[cottonseed]

1. It's going to be a crazy week.

[loudsue]

2. Hmmm... If "foreign capital" is fleeing Eastern Europe, the US, Dubai, Iceland,

etc etc etc....doesn't it make you go "hmmm" about where it's all going? It's like this whole monetary value ponzi scheme economic life we all live is built on sand. Where is this black hole that all of the world's money is falling into? Either we have it, or we don't. If we don't have it, we never did, and we've been living an illusion all along. If we do have it, it's somewhere, and there are goods to be bought with it, unless only one or two people have it all. And if only one or two people have it all, then let's just lock them up somewhere, raid their accounts, and let the entire world live the good life again.

Does anybody else see what I'm saying? I just really believe this whole world-wide crash/depression is thoroughly engineered. I don't trust it, anymore than I trusted the people who started selling it to us immediately before the bush administration stole about a trillion dollars right out from under us to give to wall street.

I. Don't. Trust. Them. The powers that be have NEVER done anything but lie to the masses. It's happening again.

[HamdenRice]

4. "where it's all going" Actually, their misfortune is our gain. It's coming here to finance stimulus

This is one of the great unfairnesses of the crisis. We (more precisely our bankers and mortgage companies) caused it; but with international savings pools terrified, they are looking for the safest possible investment, which is US t-bills. That money is flooding into the Treasury at effectively zero interest, to finance Obama's stimulus bill.

As the Russians have complained, we are soaking up all the global liquidity with our bailout and stimulus, which may make our recession less bad than that of the rest of the world that did not cause it.

That's where it's going.

[NM Independent]

3. You couldn't make this shit up for an "End-Of-The-World" movie.

"The "liquidationists" would like to see governments cut off the flow of funds to ailing financial institutions and let them fail by themselves. It's Darwinian madness, like waiting out a heart attack on the kitchen floor instead of rushing to the hospital for emergency care. The global economy is decelerating at the fastest pace on record. 40 percent of global wealth has been wiped out. The banking system is insolvent, unemployment is soaring, tax revenues are falling, the markets are in shock, housing is crashing, deficits are soaring, and consumer confidence is at its lowest point in history. This is no time to cling to half-baked ideology. The global economy is undergoing a massive system-wide contraction which could spin out of control and plunge us into another world war. Political leaders need to grasp the urgency of the moment and keep the vehicle from careening into the ditch."

I always had a feeling the R's would write the script.

[ww2player]

6. Death Spiral

I think the world economy has already begun its journey on a death spiral. Fiat money systems are doomed to failure sooner or later. Especially when you have such first rate crooks running the systems as we have now. Looks like it is gonna be sooner. Maybe after money is worthless we can finaly get rid of the political leetchs that are sucking the money out of peoples wallets so they can live high on the hog and keep thier buddies rolling in dough. At leat something good will come from the imminent disaster that's coming then.

[FieldsBlank]

5. another link to read

from the blog naked capitalism:

http://www.nakedcapitalism.com/2009/02/will-eastern-europe-trigger-financial.html

Apparently Europe is teetering on the brink of collapse
Especially Austria, which had lent out 230 bn (70 pc of their GDP) to Eastern Europe

It's just one horror story after another
I fear just one collapse would trigger an avalanche of failures

[roamer65]

7. This is where the worldwide currency crisis will begin.