Monday, October 27, 2008

Europe on the Brink.

How will this financial mess play out? No one knows for sure. Believing as I do in the resilience of capitalism and the resoluteness of the American worker, I suspect that things will sort themselves out in due course. (And how long is a “due”? That’s a good question that I cannot answer.) One thing that is becoming ever more clear, however, is that the economic situation in Europe and Asia is likely to be far worse for a longer period than in the United States. Writing in the London Telegraph today, Ambrose Evans-Pritchard observes that Western European banks hold about three-quarters of the $4.7 trillion in in cross-border bank loans to Eastern Europe, Latin America and emerging markets in Asia. This, Evans-Pritchard notes, is “a sum that vastly exceeds the scale of both the US sub-prime and Alt-A debacles.”

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