Of course, we do know. Europe is next up in the batter's box. Their debt crisis has been building steadily over the last couple of years and has finally spread to Italy and Spain. This is what you need to understand. The United States finances its own debt by government-borrowing, mostly from other countries. European countries finance their debt by borrowing from private banks.
The problem for us in the good ol' U.S. of A. is something called credit default swaps. Think of them as a form of insurance for banks. Here's the key thing to zero in on. American banks hold a shitload of these things on European banks. So when a European country defaults and the European banks take a hosing, American banks will have to pony up billions of dollars in insurance payments.
According to the Bank for International Settlements, while U.S. creditors have just 5 percent of the direct exposure to Greek debt, they have 56 percent of the indirect exposure through CDSs. Similarly, the United States has 25 percent of indirect exposure to Ireland and 44 percent to Portugal. That equals about $33.6 billion for Greece, $54 billion for Ireland and $41 billion for Portugal.Just what our already shaky economy needs to quicken that race to the bottom. And you wonder why the stock markets are panicked?