But Wait, It’s Worse … Asia (Then) vs Europe (Now)

For those of you that can’t take any more of the current semi-happiness about the economy, here is Gary Shilling’s latest (as republished by John Mauldin):

Like Asia 1997-1998

The dependence of Central and Eastern Europe on foreign financing is painfully similar to that is Asia in the 1990s that led to the 1997-1998 financial and economic collapse–except it probably will be worse this time since banks are delevering this time and weren’t back then. Also, these European countries were more leveraged in 2008 than their Asian counterparts a decade ago. This can be seen in their foreign debts in relation to GDP (Chart 8) and in their current account deficit/GDP (Chart 9) as well as in their currency declines.



Asian lands reacted to the 1997-1998 crisis by cutting foreign borrowing and building foreign currency reserves. Ironically, however, they still didn’t escape the current global recession and financial crisis. They’re no longer as dependent on inflows of foreign capital, but this time are highly dependent on exports, which are plummeting as U.S. consumers retrench.