Relying on the kindness of strangers is not a very good way to ensure one’s fate. However, this is certainly what the United States has been doing in running about a mountainous current account deficit. America’s largest creditor is now worried that the U.S. is not a good risk and has said so in public for what I believe is the first time. Given the mounting U.S. government deficit, this cannot be good for the U.S. Treasury market.

After Europe emerged from the worst war in human history, its cities lay in ruins. Its economy was in tatters. It was in this environment that an Iron Curtain fell over Europe dividing it into east and west, separating Europeans from each other for four decades. Now, another twenty years later, we risk another great divide in Europe, the Ukrainian Prime Minister Yuliya Tymoshenko has warned.

You heard the quotes (China slams U.S. profligacy). Here’s the video. After some brief introductory remarks Chinese Premier Wen gets down to ripping into the United States.

If you want to get right to his most quotable remarks, they begin right about 6:00 in this long video. Definitely worth watching.

The Ukraine-Russia row over natural gas has escalated to a new high. Now, state-owned Gazprom has completely cut off supplies to Europe through the Ukrainian transit route. It still remains unclear what the ultimate aim of the Russians are in bringing the issue to this critical state. Nevertheless, it is generally believed that Russia is making as much a political statement about NATO expansion, the disregard of Russia’s sphere of influence, and the dependency of the European Union on Russia for its energy needs. One should expect a political response from the EU shortly.

As an article in my links yesterday suggested, for many in the west, Russia’s behavior of late has lurched toward the unpredictable, volatile and aggressive. After Russia’s moves against Georgia in South Ossetia, wariness in the west has increased, sometimes bordering on hostility.

I have generally taken a more pro-Russian view of events, seeing the reactions by Russia as predictable responses to a Super Power provoked by repeated slights. That is neither here nor there as the latest controversy heats up, this time over natural gas.

I want to make a brief statement about analysis, prognostications and this global recession. When I began this site nine months ago, my focus was clearly on the downside scenario. Now, while I did believe policy makers were underestimating the threat of economic calamity, I must admit that I was optimistic about the potential outcomes. And I am still optimistic today that we can overcome the major hurdles we face. However, we must always prepare for the worst, even while we hope for the best. This is why I am still focused on the downside scenario — because I believe that complacency is still much too high regarding how quickly things could unravel.

In a world of limited resources where oil prices have plummeted, Russia’s military is ever more stretched. Yesterday, I highlighted the implosion in the Russian economy, suggesting that many in Washington see Russia as a potential problem due to its aggressive foreign policy and its declining economic fortunes.

In response, a friend who I know from my foreign service days sent me an article from the BBC suggesting that this confluence of events has increased a nuclear bias in the Russian military — with obvious negative consequences for U.S.-Russian relations. The country simply cannot afford to have strong technological capabilities and provide for its large infantry that is serving on the front lines of Russia’s increasingly unstable borders. It is choosing the nuclear option.

Russia is one country that we do not want to see fall on hard times. It has great geo-strategic power, but a weak economy, declining oil output and revenues and increasingly autocratic rule? Now it is being roiled by the global financial crisis as hot money is fleeing the country causing its currency to plummet and its stock market to swoon. Russia has used up a quarter of its massive foreign currency reserves to stabilize the situation — to no avail. Is Russia about to become a problem?

Barack Obama promises to make some dramatic changes in U.S. foreign policy after eight years of a neo-conservative agenda. The question really is what would those changes be. Below, David Ignatius outlines a reasonable argument that Obama will follow a cautious and step-wise approach (hat tip Chris).
We won’t see an immediate end to [...]

While you have your eye firmly peeled on the financial mess splayed in front of you, other industries are busy setting themselves up to profit from close business ties to the Bush Administration before a new Sherriff comes to town.
The defense industry is first on that list.Bloomberg reports that the Bush Administration had been looking [...]