At the moment, money is being sucked out of the financial system, bringing the threat of deflation. But for James Howard Kunstler, the only question is when the new money being pumped in by the Fed will exceed the amount that has disappeared. James says we could see serious inflation - and a slump in the US dollar - before the end of 2009.

This from Whiskey & Gunpowder:

This is the “other shoe” that a lot of people are waiting to drop. Right now we are caught up in a compressive debt deflation as mortgages stop “performing” and loans of all kinds are welshed on. Since money is loaned into existence, and a great many loans are not being repaid, then a lot of money is going out of existence. That’s what I mean when I say that capital is leaving the system.

At the same time, the Federal Reserve has made

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Financial NewsJason Corcoran in Moscow and Harry Wilson17 Nov 2008 Moscow-based investment bankers are at the sharp end of job cutsRussian index slumpsIt seems like a different age, but it was only recently that Moscow-based investment bankers had firms fighting to secure their services and could command pay packages commensurate with demand.Senior Moscow-based bankers and those covering the Russian markets asked for and got lucrative pay deals as local brokers and large international investment banks fought a hiring war to build their businesses in the country.Guaranteed packages in excess of $10m (€7.8m) were not unheard of and even junior staff with experience of the Russian markets received $1m guarantees to join rivals.In early 2007, Russian investment bank Alfa-Bank recruited the head of UBS’ Moscow office Ed Kaufman for a ...

From the New York Times editorial: President Bush spent years looking the other way while Mr. Putin harassed opponents, stifled a free press and bullied his neighbors. (A new report that suggests that Georgia had no reason to send troops into a breakaway enclave is disturbing, but not surprising, and still doesn’t justify Moscow’s brutal invasion.) While he was busy looking into Mr. Putin’s eyes, Mr. Bush also ignored Russia’s list of grievances — many of them illegitimate, but not all. Mr. Medvedev and Mr. Putin now seem determined to push their way to the top of Mr. Obama’s very crowded agenda. We suspect that they will get a more receptive hearing if they stop trying to bully their own people — and everyone else.

From Robert Skidelsky in the Financial Times: Despite the professionalism of the rescue mounted by the finance ministry and central bank – and the budgetary cushion provided by the stabilisation fund, brainchild of Andrei Illarionov, Mr Putin’s discarded economic adviser – Russia carries a heavy burden of political risk. This is the real economic legacy of the Putin years. Mr Putin does not understand the need for a degree of consistency between economic and foreign policy: or rather the reconciliation he has sought has been based on Russia’s energy windfall. If this has now ended, as seems likely, the key assumption of his politics – that Russia can use its energy power to boost its world power without paying much attention to the sensitivities of anyone but the Russian electorate – has been destroyed. Russia needs to scale down its geopolitical ambition to its real weight – that of an emerging ...

The Wall Street Journal is reporting that the Kremlin's oligarch rescue plan is being fully deployed with the first major bailout of an individual, as $2 billion was tossed to Mikhail Fridman to pay back a loan from Deutsche Bank AG, allowing him to retain his 44% stake in Vimpelcom (VIP), one of the country's largest and most successful mobile phone operators. On Monday, a Russian court froze Fridman's stake in VIP, which actually protected the Alfa Bank founder from having the collateral seized by his creditors. The Journal reports that for the $50 billion rescue package, they have already received more than $100 billion in requests, and that Fridman appears to be the first official beneficiary: The selection criteria for the bailout loans are supposed to be objective, but VEB's board is dominated by government officials and ...

La Russophobe has posted a translation of a very, very good column by Yuliya Latynina in Novaya Gazeta about the fifth anniversary of Mikhail Khodorkovsky's arrest. Latynina poignantly argues "The people surrounding president Putin were not taught how to manage businesses. The people around president Putin were not taught how to run a country. They were, however, taught how to annihilate enemies. And in the absence of enemies, they get invented. Especially if the people protecting the president from enemies can take over those enemies’ property in the process of annihilating them." Recommended reading.

The importance of the Kremlin-controlled piggy bank Vnesheconombank (VEB) is rising during this financial crisis, as the group becomes the government's critical instrument in its efforts to re-nationalize a large slice of the economy from the country's beleaguered elite business class. Eric Reguly at the Globe and Mail takes a quick look: The financial crisis seems to have given the Kremlin the opportunity to reassert at least some control over the industries that were so haphazardly discarded during the Yeltsin era. The agent of influence is a government development agency called Vnesheconombank (VEB). The chairman of its supervisory board is - guess who - Mr. Putin. Some of Russia's most powerful government officials, including the finance and transportation ministers, prop up the rest of the board.

The BBC reports that Russia's economy, especially the construction and real estate sector, is grinding to a halt... But below Prime Minister Putin continues to insist that everything is peachy. RA has commented that the word "crisis" might be made illegal quite soon in the Russian media.

This characteristically bombastic Washington Times editorial argues that Europe's response, and especially that of Germany, to Russia's invasion of Georgia has been seen as rewarding of bad behavior - confirming Russia's claim to its sphere of influence. I wonder if Germany has thought that this "sphere" may include East Berlin... Mr. Putin and Mr. Medvedev have demonstrated that the West is powerless to protect Russia's neighbors. Mrs. Merkel stated that the plan to include Georgia and Ukraine in NATO provoked Russian aggression in August. Instead, the German leader should ponder whether the provocation emanated from her decision in April to kowtow to Russian demands - behavior which emboldened Moscow to act against Georgia. If Mrs. Merkel's logic is sound, then, in light of her rejection of the NATO bid, Russian troops should withdraw completely from South Ossetia and Abkhazia. Yet it is more likely that recent Western weakness will ...

Leave it to the editorial board of the Wall Street Journal to put Dmitry Medvedev on par with Hugo Chavez and Mahmoud Ahmadinejad for his Evian speech. Like the overly sensitive victim of a schoolyard bully, the more Washington reacts to overt anti-Americanism, the more it pleases the provocateur. In a particularly intriguing passage, Mr. Medvedev in Evian noted NATO's plans to expand, and "quite naturally," he said, "we regard these actions as directed against us." Then, perhaps anticipating criticism, he said, "Sovietology, like paranoia, is a very dangerous disease, and it is a pity that part of the U.S. Administration still suffers from it." Some thought Mr. Medvedev would lower the volume on former President Putin's anti-U.S. outbursts. Instead, it appears he is joining such other anti-American stalwarts as Hugo Chavez and Mahmoud Ahmadinejad in concluding that international forums are mainly venues for ranting about the ...