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Russia’s choice between a nuclear arsenal and a modernized infantry

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.

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Links: 2008-12-15

Happy Monday. It was a fairly slow news day actually. But that doesn’t mean there weren’t a lot of stories to follow on economics and finance, because there were a lot. I am officially stopping the Madoff madness and moving on to something else. But I actually do have one story on Bernie today.

Stories that I really want to pint out? There’s the German-British political mess wich is leaking out into currency markets. This basically boils down to a debate between Austrian-style economics and Keynesian economics. So, I have a whole section on this.

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Treasurys are in a bubble

The yield on all U.S. Treasurys securities are at historic lows. The 3-year T-bill and the 1-year T-bill have both actually sported negative yields — meaning investors are paying the U.S. Governemnt to borrow money from them. This is the first time this has ever happened and suggests that the zero bound may not be a problem. What gives?

The conventional wisdom in the marketplace is two-fold. First, many believe that investors are fleeing to the safe haven of U.S. treasury bonds and away from risky assets as the financial crisis has created extreme volatility in riskier asset classes. It is also believed that treasury prices are being supported by future deflation expectations. With the price of oil and commodities collapsing and consumer demand weak, inflation has dropped precipitouly in most countries around the world, including the United States.

I have a different view. Treasurys are in a bubble.

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Irish government unveils plan to recapitalise banks

Today the Irish government has unveiled a 10 billion euro plan to recapitalise its outsized banking sector. I have posted a number of times about the depth of woes in Ireland including the high debt-to-gdp level, the crashing property sector and the steep decline in government revenues. I have also highlighted the fragility of the Irish banking sector. Ireland is a small nation that is heavily dependent on financial services as an economic engine. It’s financial sector is much larger than the government can reasonably support. This makes the country very vulnerable to a loss of confidence in its banking sector.

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Russia devalues currency again as foreign reserves plummet

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?

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Links: 2008-12-14

Hello again and happy Sunday reading. I have the useful rubbernecking fascination with Bernie Madoff again today. But, my focus is a bit different today. You will see a lot of stories about the UK. In the wake of the massive $11 billion writedown by HBOS on Friday, there is a lot of news coming out of the UK and all of it is bad.

Otherwise, it’s a Potpourri from around the net. Other news stories can be found at our newsfeed. The newsfeed is also available via newsfeed. The newsfeed is also available via RSS.

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Latest update on Bloomberg suit against Fed

Back in November, Bloomberg News was forced to sue the Federal Reserve to gain greater disclosure on how emergency loans were being made to financial institutions and on what collateral was being used. I have followed this story closely and will continue to update you on its progress.

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Links: 2008-12-13

I continue to be impressed by the absolute magnitude of the Madoff scandal. This Ponzi scheme went on for decades. It is a truly frightening spectacle. See some of the articles below. Otherwise, it’s a Potpourri from around the net.

Other news stories can be found at our newsfeed. The newsfeed is also available via RSS.

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Macro Maven: Expect a long difficult recession

Stephanie Pomboy is an economist who specializes in macroeconomic forecasting and their implications for investors and she has some very bad news for those looking for a quick recovery: it’s not going to happen. In Barron’s latest issue, Pomboy makes the case for an extended downturn (hat tip Scott) and that makes for a challenging investment climate. However, all is not lost, as Pomboy sees the potential for a rally in high yield assets and even equities.

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FDIC shuts down Haven Trust and Sanderson State

Another Friday night in America means another bank goes bust. This week, it’s two banks: Haven Trust of Georgia nd Sanderson State of Texas. BB&T is stepping in for the deposits at Haven Trust. And Pecos is taking the deposits at Sanderson. These banks are small, so this is not earth-shattering news.

Below are the pertinent details and links back to the FDIC website.

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Writedown News: 12 December 2008

It’s been a month since I updated my list of writedowns and other credit crisis-related news, so I am sure that this list is filled with holes and missing information. Here it goes nonetheless.

Below are the writedowns from the previous month. These links are compiled in the credit crisis timeline.

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Links: 2008-12-12

It’s Friday and the madness must come to an end. I don’t have a lot on the table so I’ll leave you with just the usual links. I would say the Madoff stuff is pretty unbelievable. See the first four articles to see what I mean. Other news stories can be found at our newsfeed. The newsfeed is also available […]

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