I recognize it is in the interests of mass media to pump up economic news with doom and gloom scenarios in order to sell their wares.

But at what point do we start worrying that the news being reported is really, really, really that bad?

Reuters:

The Swiss National Bank shocked markets on Tuesday by setting an exchange rate cap on the soaring franc to stave off a recession, discouraging investors anxious about flagging global growth from using the currency as a safe haven.

Using some of the strongest language from a central bank in the modern era, the SNB said it would no longer tolerate an exchange rate below 1.20 francs to the euro and would defend the target by buying other currencies in unlimited quantities.

The move immediately knocked about 8 percent off the value of the franc, which had soared by a third since the collapse of Lehman Brothers in 2008 as investors used it as a safe haven from the euro zone's debt crisis and stock market turmoil.

Analysts said that the SNB should be able to defend 1.20 as it can print unlimited francs but that long-term success depended on efforts to deal with the euro zone's debt problems.

"The current massive overvaluation of the Swiss franc poses an acute threat to the Swiss economy and carries the risk of a deflationary development," the SNB said in a statement.

A "deflationary development" is Central Bank speak for "depression."

And it isn't just the Swiss. Alarm bells are going off all over Europe as Greece will now almost certainly default and Italy, despite the European Central Bank buying its bonds, looks like it could join them:

The euro zone's debt crisis appeared at risk of spiraling out of control on Tuesday amid doubts about Italy and Greece's willingness to push through austerity demanded by their partners, and hardening opposition to further aid in paymaster Germany.

Against a backdrop of nationwide strikes, the government of embattled Italian Prime Minister Silvio Berlusconi scrambled to secure parliamentary backing for a package of reforms that has hammered Rome's credibility in financial markets because of the chaotic way it has been handled.

Meanwhile fiscal backsliding in Greece has put a new aid payment from the country's international lenders at risk and prompted some lawmakers in German Chancellor Angela Merkel's party to press her on why Athens is not simply booted out of the 17-nation currency bloc.

Just six weeks after euro zone leaders came together in Brussels to agree new anti-crisis measures, their strategy looks to be unraveling, with resistance to austerity in Europe's southern periphery rising just as resentment in core countries like Germany builds to a crescendo.

In the past few years when such a tipping point was approaching, Germany and France would step forward and with the help of the European Central Bank, raise enough cash or print enough Euros to paper over the problems and allow the EU to muddle through.

How long can they keep that up? France is now in trouble and Germany appears not to have the political will to keep bailing out its neighbors. "Muddling through" appears not to be an option anymore.

Stephen Hayward:

The head of Deutsche Bank yesterday said that "It is an open secret that numerous European banks would not survive having to revalue sovereign debt held on the banking book at market levels."

Oh goody.

And then our friends at ZeroHedge point out an even gloomier assessment out today from UBS predicting possible end-of-days kinds of stuff from the prospective collapse of the Euro:

The cost of a weak country leaving the Euro is significant. Consequences include sovereign default, corporate default, collapse of the banking system and collapse of international trade. There is little prospect of devaluation offering much assistance. We estimate that a weak Euro country leaving the Euro would incur a cost of around EUR9,500 to EUR11,500 per person in the exiting country during the first year. That cost would then probably amount to EUR3,000 to EUR4,000 per person per year over subsequent years. That equates to a range of 40% to 50% of GDP in the first year.

Were a stronger country such as Germany to leave the Euro, the consequences would include corporate default, recapitalisation of the banking system and collapse of international trade.

Reading the blogs of economists writing about this is equally scary. I wish I could just ignore all of this and put it down to posturing and exaggerated rhetoric.

But I can't. People don't want "austerity." They apparently would rather see their economies go down the tubes rather than bite the bullet and save themselves. We Americans are no better, although we are not as close to disaster as the Euro zone appears to be.

Make no mistake, though. If Europe goes down, we go down with it. If that happens, the petty politics being played by Obama and the GOP will seem very small indeed.