As a rule, middle-class societies newly liberated from dictatorship generally go on a credit binge that ends in tears. It's like giving a released prisoner a limitless credit card -- a spending spree is sure to ensue. That's what happened in Asia and Latin America in the past, and what more recently happened in the former "Eastern Bloc" nations of Europe.
Unlike past examples, however, the credit binge in Eastern Europe has been in foreign currencies, with Western European banks or their subsidiaries extending most of the foreign credit. In 2007, private-sector foreign currency equalled 126% of foreign-exchange reserves in Eastern European countries. And in 2008, the region's banking system borrowed an additional $100 billion
