How bad is it going to get? Our reference point is the 1930’s and the Great Depression. But people in Russia and Asia only have to recall events of a little more than a decade ago. The “Asian Contagion” actually began in Russia in 1998 when the country defaulted on its national debt. The crisis then hit Thailand and within a year had spread to all of Asia with a few exceptions (Malaysia and China being the main ones).

I had a front row seat. At the time, I ran a technology-transfer business in Southeast Asia and our central office was in Jakarta, Indonesia.

For a while it looked like the crisis might skirt Indonesia. But it didn’t. And when it hit, it hit with a vengeance. The economy had been expanding at an 8-10 percent clip for several years. Companies were expanding to take advantage of soaring sales. And banks were helping companies expand by giving out loans left and right.

The problem was, those loans were in dollars. That was fine as long as the exchange rate was stable. But the Indonesian Rupiah lost 80-90 percent thanks to the crisis. The cost of converting local currency into dollars to pay back these loans skyrocketed. At the same time, sales plummeted as economic growth screeched to a halt.

The subsequent carnage was inevitable. Companies, including banks, went out of business by the hundreds.

Mind you, these companies weren’t over-leveraged. They had not been engaged in reckless debt-driven expansion. They had not made one wrong-headed business decision after another. They were simply victims of a colossal crisis that struck with lightning speed.

And what was the advice of the IMF and the U.S.? Let them fail … spend less in order to lighten public debt … and remove subsidies.

This was the economic orthodoxy of the time. And it couldn’t contrast more with what we’re doing now: Rescuing banks and companies … increasing our debt … and handing out subsidies to undeserving companies and banks.

My five-star hotel room which used to cost $200 now cost only $60. My meals at Jakarta’s best restaurants set me back less than $10. You could go to a local high-end store and buy the most expensive suit for $40.

Yet none of that matters when your business is going down the drain. One by one, my customers withdrew their orders. Accounts receivable went unpaid. And millions of dollars worth of inventory went undelivered.

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I was just one small company. Multiply my plight by the thousands and you get an idea what Indonesia went through. The Philippines, Singapore, Taiwan, Korea, and other countries suffered similar upheavals.

And now it’s happening again to these countries in Asia. Only this time China isn’t escaping the economic turmoil. And it’s happening also in the Middle East, South America, and the subcontinent.

Global stock markets have lost roughly $32 trillion of market value since they peaked in October 2007.

And the countries that were flying the highest back then, have been hit the hardest.

China’s growth engine – exports – has gone away. From a more than 22 percent growth rate in 2008, China’s exports plunged to a negative 2.8-percent rate in December.

The 45,000 factories in China’s major export cities of Dongguan, Shenzhen and Guangzhou were running overtime last year at this time. Now, 15,000 of them have been shut down. And it’s just the beginning. American consumers – their main customers – aren’t in a buying mood.

The Middle East has been hit just as hard. Their markets leaked $2.5 trillion in just the past four months. We were giving them almost a trillion dollars a year for their oil in the greatest wealth transfer the world has ever seen. This year? OPEC should ring up about $440 billion in oil revenue.

Now here’s the thing. Over the past 15 months, the Arab oil countries have been the biggest foreign buyers of U.S. Treasuries. They purchased $245 billion worth.

The next biggest buyer is … yes, you guessed it. China. It bought $233 billion worth.

With the U.S. economy in the dumps, these government bonds aren’t as attractive as they used to be. China has already said they want to diversify away from them, though nobody thinks there will be a wholesale dumping of U.S. bonds.

The U.S. government will be stepping up its issuance of bonds to pay for the bailout’s growing bill. But it’s clear we can’t expect these countries to continue buying our bonds like they have been.

We wouldn’t be facing this dilemma if we chose to follow the advice we gave so freely a decade ago to a dozen Asian countries. Something has to give. The interest offered on these bonds will go up. Or the Fed could step in and start buying bonds. Either or both outcomes point to a further debasing of the U.S. dollar, paving the way for the next inflationary storm. It’s only a matter of time.

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