Has Paul Krugman been reading my stuff? He is certainly thinking like me regarding emerging market risk. He has a post today talking about Latvia as the new Argentina.

Despite the gloom and doom that you might read right here, things are certainly much better in credit markets than at the height of the credit crisis. Of course we still have a long way to go, but this chart from Bloomberg of the TED spread should give one cheer.

This is a very sad tale.

Marshall Auerback here. This will be short, but I felt compelled to post with my views on China.

There was clearly a bubble in exports in the past four years, with exports serving to cover capital inflow (overinvoicing must have been a big part of that). So this is just part of the overall collapse of speculative capital flows, and not so much a decline in real effective demand. China can handle this, the population is not constrained by either income or debt.

Greetings to all. This may be one of my last posts before Christmas. So forgive me by raining on your festivities with some dismal notes on the dismal science.

And by the way, who ever called Economics a science? Economics seems more akin to medicine in the days of leeches and bloodletting given the inability of economists to predict anything.

In any event, I have the usual smattering of posts from around the internet. However, I also have three subject which I would like to stress here.

The punderati has been especially kind to China. As the global recession takes hold, the conventional wisdom has moved from the largely debunked de-coupling of China to a story where China slows, but much less so than the west. But is that really how things will play out?

On a recent Bloomberg Radio with Tom Keene broadcast, Harvey Pitt and Arthur Levitt, two former SEC Chairman were guests. Levitt made the suggestion that hedge funds had once been given the choice of “regulation-light” or “regulation-heavy.” Now, in the wake of the Madoff scandal, “regulation-heavy” is all but assured. But, isn’t this just?

I have been arguing for some time that the credit bubble has been replaced by a government bond bubble because much of the liquidity pumped out by the world’s central banks is not going to increased lending. As this money must be invested somewhere, it has gone to the most favoured asset class: government bonds.

With oil prices having plummeted, one should expect Middle Eastern oil exporters’ budgets to implode. What were budget surpluses will quickly turn to deficits, stoking civil unrest amongst the burgeoning masses. Very high population growth rates mean that many oil exporters must use government monies to support the domestic economy. However this becomes harder to do with revenue from oil decreasing.

Below is an article that has been syndicated on a number of sites in the Indian press (hat tip Ravin) which challenges the common wisdom that Asia, and particularly China, will weather the downturn better than the U.S. While the articles conclusions are contentious, its analysis bears noting, making those conclusions an outcome to not dismiss.