Switzerland Threatened with National Bankruptcy

What a bizarre event the Long Crisis has become. Switzerland, that long time stronghold of financial stability, faces a banking crisis because of an over abundance of lending to Eastern Europe.

Economist Artur Schmidt says Switzerland could become bankrupt because Swiss banks extended billions in credit to Eastern European countries which now can’t pay back the money. Eastern European currencies are falling and more borrowers are having problems repaying their loans.

“Switzerland, like Iceland, is threatened with a potential national bankruptcy,” Schmidt told the Swiss daily Tagesanzeige. “Because of the devaluations of the national currencies, the debt to Switzerland has increased by more than one-third,” Schmidt notes. “Many of the Eastern European countries have serious payment difficulties and are virtually bankrupt.”

The Euro Dollar is also threatened by the non payment of loans made to Eastern European countries. Some estimates are that Western European banks extended over 25 trillion Dollars in loans to Eastern Europe that are in danger of going into default.

That may explain why in spite of its own troubles the US Dollar has held up fairly well as this long crisis continues. While a seriously flawed currency the Dollar is still the world’s reserve currency and stands out as not being so unattractive in a room filled with ugly pigs. That’s another way of saying that as bad as conditions are with US fiscal and monetary policy conditions are even worse in Europe.

Should European banks, including the Swiss, have to attempt to cover up 25 trillion Dollars in loan losses it would make the US stimulus packages to date look like peanuts. Unfortunately in a global economy the cross contamination that is taking place from country to country will in the end spare no one. The long crisis in the United States would become much worse overnight.

Keep your eye on the European banking crisis. Should conditions continue to deteriorate the US Dollar may suddenly be once again , by default, in great demand, at the same time that demand for gold soars to new heights. I don’t think anyone, anywhere, in anyway, is prepared for a bankrupt Switzerland.

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