Britain and America have been hit hard by the credit crunch. But greater havoc will ravage the world's weaker economies

The financial earthquakes in America, Britain and Western Europe are rumbling on, but after the government rescues that began with Gordon Brown's bank bailout, there is no doubt that the basic structures of these advanced economies will remain intact, as they have after previous crises. In the past week, however, a series of powerful aftershocks has been shaking Hungary, Ukraine, Russia, Argentina and many other countries on the periphery of the global financial system, threatening not only their economies, but even their systems of government.

To see why this has happened and what it may mean for the world economy we need to understand why the unequivocal bank guarantees that the US and Western European …