Austria’s bank exposure to emerging markets is equal to 85pc of GDP
– with a heavy concentration in Hungary, Ukraine, and Serbia – all now
queuing up (with Belarus) for rescue packages from the International
Monetary Fund.

Exposure is 50pc of GDP for Switzerland, 25pc for Sweden, 24pc for
the UK, and 23pc for Spain. The US figure is just 4pc. America is the
staid old lady in this drama.

Amazingly, Spanish banks alone have lent $316bn to Latin America,
almost twice the lending by all US banks combined ($172bn) to what was
once the US backyard. Hence the growing doubts about the health of
Spain’s financial system – already under stress from its own property
crash – as Argentina spirals towards another default, and Brazil’s
currency, bonds and stocks all go into freefall.

Broadly speaking, the US and Japan sat out the emerging market
credit boom. The lending spree has been a European play – often using
dollar balance sheets, adding another ugly twist as global
“deleveraging” causes the dollar to rocket. Nowhere has this been more
extreme than in the ex-Soviet bloc.

The region has borrowed $1.6 trillion in dollars, euros, and Swiss
francs. A few dare-devil homeowners in Hungary and Latvia took out
mortgages in Japanese yen. They have just suffered a 40pc rise in their
debt since July. Nobody warned them what happens when the Japanese
carry trade goes into brutal reverse, as it does when the cycle turns.
. . .

Just in case you were wondering.  Here is the link.  By the way, this is further evidence that the driving force behind the earlier boom was the global savings glut, and sheer giddiness, not the excessively loose monetary policy of Greenspan’s Fed.  The ECB has pursued a relatively tight monetary policy since its origin.  It also will be interesting to see what trouble arises in Spain, since Spanish banking regulation has been considered a model of how to keep these problems under control.

And here’s Romania fact of the day:

Romania raised its overnight lending to 900pc to stem capital flight…

Alex is a very good truth-tracker but on credit I remain stubborn in my belief that there is a credit crunch.  Here is one report:

How is trade finance coping with the credit crunch

Badly. Steve Rodley, director of London-based shipping hedge-fund Global Maritime Investments, puts it bluntly: "The whole shipping market has crashed." The trouble is that credit is the lifeblood of commerce, but it is built entirely on trust. And that has evaporated. As such, many ship owners can’t get banks to issue letters of credit, particularly on cargoes of price-volatile commodities that no longer look like adequate collateral. Even those who can get letters of credit are finding that their counterparties may no longer trust the credit rating of anything other than large, well-established banks, many of which are now charging big premiums. Letters now cost three times the going rate of a year ago, according to Lynn.

Here is another report.  Here are other reports.  Or read this account:

What’s more, the dollar-denominated trade finance lines that exporter companies rely upon to do business are drying up in dramatic fashion amid the global credit crunch. In Brazil — the world’s top exporter of beef, iron ore, sugar and coffee and the No. 2 exporter of soy — total outstanding trade lines have fallen by half this month to around $18 billion.

Here are simple and in my view decisive quantitative indicators of the current domestic credit crisis.  Or here is another report:

According to experts interviewed by Bloomberg, "letters of credit and the credit lines for trade currently are frozen," and as a result, "nothing is moving".

Or here is a recent survey of U.S. retailing CFOs:

Some 41 percent of US retailers are seeing tight credit as a result of
the crisis in the banking sector, and many will cut staff and reduce
buying as a result…

Many other surveys paint a similar picture.  I can only repeat my earlier words that immediate credit flows are demand-driven and they do not measure bad credit conditions concurrently because they stem from prior bank commitments.  To suggest, as commentator Tom does (and Alex endorses), that we have no credit crisis until lines of credit are exhausted, is in my view sheer logomachy (I like that word).  Nor is my view "convenient" or unfalsifiable as was suggested.  Here is Wikipedia on lagging indicators and yes it tells you that standard forms of credit fall into this category and this has been understood for some time.  Look instead at the currently informative pieces of the evidence and you will see that they point in a very consistent direction. 

It is true that many credit channels have not shut down.  But the ones
that are shutting down are enough to cause a severe global recession.   

Addendum: I added this comment to the discussion: "People, financial markets and financial institutions around the world
are falling apart. I’m not pulling this stuff out of a hat or from a
few crazy journalists. There is massive disintermediation going on
right now, much of it in the shadow banking system. I am trying not to
be dogmatic but it is hard for me to see on what grounds anyone would
deny this."

From all the hullabaloo I thought he had granted the death of capitalism but no.  Here are his prepared remarks.  Here is part of the Q&A.

He did admit that risk models had failed by selectively overweighting periods of euphoria and that the credit default swaps market had exploded in our face.  He also knows that there are hundreds of trillions of dollars in open positions in other derivative markets and most of them have worked relatively well in this crisis; his words indicated as such.  He also stressed that capitalism has had a string of forty years of numerous successes and that recent experience is an outlier.  He is still not sure what to make of the current failure.

Greenspan also said: “Whatever regulatory changes are made, they will pale in comparison to
the change already evident in today’s markets,” he said. “Those markets
for an indefinite future will be far more restrained than would any
currently contemplated new regulatory regime.”

His policy recommendation was the modest one of requiring banks to keep a share in any mortgage.

I don’t agree with all of his detailed points (e.g., too much emphasis on subprime securitization), but I thought the overall ideological "flavor" of his remarks was essentially correct.  For differing, and yet not totally different, point of view, here is John Quiggin on Greenspan.  Here is the Ayn Rand Center on Greenspan.

Five weeks after the government launched an unprecedented bailout to
save the private company from bankruptcy, AIG has so far burned through
$90.3 billion of government credit.

How many weeks are in a year?  Fortunately crude extrapolation is not always the best way of making an estimate, but it still seems this problem is not yet under control.  The change in ownership has not brought superior results.

The article, by the way, details how Treasury may spend money on other insurance companies too.