One word you don’t hear bandied about as much lately is deleveraging. It’s possible that as things have seemed to pass the crisis phase a sense that we are somehow going to be able to muddle through has started to take hold. A brief article in the Telegraph.co.uk makes me wonder if we might not be a bit too comfortable.

The article notes that S&P has warned that it might prove “extremely difficult” for European companies to roll over $762 billion of rated debt coming due this year. Credit issues and crowding out were cited as the reasons for the concern.

For whatever reason, the idea of rollover risk hit a nerve and I started looking around to see just how big a problem this might be. Here is what I put together very quickly:

• Russia has $78 billion it needs to roll this year.
• European banks have about $2 trillion of of dollar liabilities that need to be rolled.
• Eastern Europe has $400 billion that needs to be rolled over this year.
• There is about $678 billion of commercial real estate loans in the U.S. that need to be rolled by 2012.

I quit counting numbers at this point. I’m sure (I hope) that someone has a handle on just how much has to be rolled over. I think you can see where this is going.

Huge government borrowing to fund fiscal stimulus combined with various leverage schemes to bail out banks and others a large call on the is going out to the world’s investors. How the lesser credits fare is anyone’s guess. I know that it’s the same old over crowding argument but at some point in time it will become relevant.

Leverage is beginning to look like wind driven water. Nothing can stop the eventual destruction it will wreak. It’s a force of nature. So far we’ve been doing our level best to mitigate or forestall the inevitable but it is still coming at us. Either all of this maturing debt gets rolled over or someone has to take a hit.

To the extent that central banks and governments can buy time they have a chance of dodging this. Time can only be bought right now by substituting their credit for those that cannot refinance. There is a limit to that strategy and I suspect it might come sooner than is expected. Either the credit markets or the taxpayers who must ultimately pay the bill will put a stop to the transfer of liability from those who cannot pay. An accounting is probably nearer than we care to imagine.

In the end, we are going to be required to deal with the leverage issue. The present course of substituting sovereign credit for private credit obviously does nothing to reduce the overall level of leverage. Defaults as rollovers fail may well become the story of 2009.