On Tuesday, my dad and I took a trip to the Chicago Auto Show. I can honestly say that it was the first time that I have seen the effects of the current economic debacle firsthand. Last year, I attended on a Wednesday. The place was packed with both people and cars. This time around, there were maybe half as many people as last year and about 75% the number of cars. It was amazing. The place felt like a ghosttown. America's GDP in the Fourth Quarter of 2008 dropped by 3.8%, which is pretty massive. In Europe, however, it is far, far worse.
The Telegraph of London reports that Western European banks have five times the exposure to bad assets as America and East Asia. Additionally, European banks (especially Austrian, German, and Swedish) have invested massively into Eastern Europe. That was a bad idea. Many of those nations aren't on the Euro, which means that if their loans were made in different currencies and that currency drops against the Euro, they either owe more (if the loans were made in the native currency for a stated amount of value in Euros) or the bank makes less (if the loans were made in the native currency and is now worth far less in real terms). Either way, the banks loose tons of money. Even more, because of mass demand dropoffs, especially in commoditites, Eastern European industries, which heretofore have been chugging along at mega-growth rates (sometimes in the teens), are suddenly contracting. Their loans cost more to them, are worth less to the bank, and are harder to pay off because of the losses in revenue. It's a complete mess. Add to it that Russia isn't busy buying debt or helping out non-Russian industries because it has spent the last few months using up 36% of its massive foreign currency reserves to keep the rouble from completely and utterly collapsing (it has lost 35% of its value thus far; the Russian stock market has dropped 70% in the past year).
All told, Europe's economy is in the crap-heap even more so than ours.
Germany, the industrial center of Europe, had 8.4% GDP decrease in the Fourth Quarter of 2008. We had 3.8%.
Methinks this is going to last for a long, long time.