IN our May issue, No 217, under the headline, "Fasten Your Seatbelts: Hard Landings Ahead," we predicted that the world was about to suffer a fiscal train smash, a global depression of historic proportions. Much faster than anyone could have foreseen, that disaster is now upon us, bringing with it maniacal currency swings and massive market declines. Globally, we are now in one of the most dangerous periods in history.

More than one-third of the world’s economies are already deep in depression. Every investor fears that the next big event will be the Western crash, to follow the crashes of the Asian and Russian markets.

In the US, all indications are that the Clinton governance is about to be flushed away. With less than two months to go before the mid-term elections on November 3, the Democrats - unwilling to carry this albatross with them in the electoral process - are demanding Clinton’s resignation. No matter what happens there, the US Stock Exchange has already taken a major hit. As this is written, the Dow Jones is 12% off its July 17 high of 9 337.

Social theorists have no method for predicting how the investment mood will change: but the sense is there that confidence is looking for an excuse to plummet. Everybody has the sense that they are living at the end of an era; that the good days are over; that we are entering Depression, spelt with a capital "D" . . . that Europe and North America are gradually being sucked into the downward spiral that has already engulfed Asia and Russia . . . and, of course, our own SA.

The key problem is that we live in a world swamped with debt. The now-expiring US market "bubble" has almost from the start been scripted around a set of fictions. Western leaders have long been terrified of what would happen if the truth were faced: that the IMF, World Bank, Western central banks and governments today carry some US $2 trillion in outstanding loans to Second and Third World countries: money now almost certainly lost forever.

That’s why, for example, the US could not deal too sharply with Pakistan when it developed the nuclear bomb: for fear it would default on its US$32 billion foreign debt, starting a run of such defaults.

As US Treasury Secretary Robert Rubin can tell you, too much truth can be a very bad thing for markets built on myths. Now we know that the Russian economy is a corpse: and that Russia’s crisis could be the world’s day of reckoning.

Yet the signals were there all the time. As far back as June Russia’s chief financial officer, Venianin Sokolov, said that all the previous IMF billions pumped into Russia have been lost, wasted or stolen "at the highest levels" of Yeltsin’s government, which he called "an entirely corrupt regime, shot through with larceny and corruption."

Of the thievery, Sokolov said that government "consciously and deliberately blocks efforts to get at the truth . . . creditors can maintain the falsehood that the loans are good, but foreign loans are nothing but a fix for a dope addict." Confirming his bleak picture, a recent study estimated that while Russia’s foreign borrowings in recent years have totalled US$99 billion, a full US$103 billion has been spirited out of the country.

Russia’s loans are never going to be paid back. Moscow is sunk in debt. At the end of July, Russia’s debt burden was five times above its annual budgetary revenues. Tens of billions of that debt came due in 1998, yet, despite all that evidence, the IMF continued this year to push in vast financial rescue packages, priced at about US$15 billion on top of a previous US$9 billion. Taking out new loans to pay interest on old loans is a good definition of bankruptcy.

Slice it as you like, Russia’s present system is at a total dead end. Corruption has reached Nigerian levels. Apart from crime and widespread flight of capital, the country suffers from massive tax evasions, the Mafia controls key parts of the Moscow government and huge sectors of the economy. As with all other exporting countries, Russia has been hard hit by Asian financial turmoil. Starved for capital, many industries operate on a barter basis, again cutting into the tax base.