The next exciting saga in the unfolding disaster will come from emerging markets. Hints of the impending trouble are all over the net today. None of it is all that exciting yet, but in the past these kind of rumors and small stories have singled the start of a big blowup (by past, I mean over the last couple of months).

You can see some of what I am talking about with this post at Macro Man.

Or in this story from the Wall Street Journal.

Or in this from Felix Salmon.

Or in this from Naked Capitalism and this as well.

Plenty of more stories out there just like the one’s above.

From Market Wire….

Who would ever have thought that in oil-rich Western Canada we would see diesel fuel being rationed? That’s exactly the scenario taking place in Alberta, Saskatchewan and Manitoba where a severe shortage of truck diesel fuel was playing havoc with truckers throughout the region. Carriers were seeing their fuel supplies rationed by as much as 10% to 50%. The card-lock privileges for all new accounts were suspended by at least one oil company and the hours that card-lock service was being made available to existing customers were being restricted. We were being told that things would not be returning to normal for at least several weeks, if not for the rest of October and November.

All these shortages are beginning to bother me. It is as if even the first world is not first world anymore. It is one thing if prices go up and down, it is another if there is no fuel to be had at all.

It’s more of an emotional thing then anything else. Of all the problems we face, fuel shortages are least of our worries. The slowing economy is likely to cut demand by so much we will not be worrying about refinery capability for awhile. Though that is cold comfort to Canadian truckers who are trying to ship products right now.

The current crisis in the US does not surprise me. But the problems that Russia is having do.

This may surprise those people who know that I have long said that the Russian state is doomed to catastrophic failure. But I figured that Russia’s problems were a couple of years away from being really serious. And maybe 5 to 10 years away from being catastrophic.

The reason I thought this is that Russia built up huge reserves when oil prices where high. Moreover, oil prices are still pretty high by historical standards. Now I figured that oil prices would fall with the US economy. But I thought those huge reserves would keep Russia from having big problems for a bit. But that does not seem to be the case. From the The Financial Times…..

Banks across Russia have faced a rise in outflows as depositors have begun to lose trust in all but the biggest state banks, VTB and Sberbank, which have received most of the government’s liquidity support.

Tatyana Sadovskaya, the director of a branch of Khnati Mansisk Bank in the city of Nizhnevartovsk, on Wednesday told Interfax news agency that in response to rumours of her bank’s insolvency: “People have formed long lines at cashiers and at bankomats, people are taking their deposits and closing their accounts.”

Natalia Elisseva, vice-president for financial development at the Bank Nizhni Novgorod, based in the city of the same name, said the number of clients closing accounts had risen. “If there is something that can sink the banks, it is panic amongst the population . . . If there is a panic, not one bank will stand, regardless of state support.”

These problems are in spite of the fact that the Russian government has sett aside 200 billion dollars to bail the banks out. That 200 billion dollar figure is bigger relative to the size of the Russian economy than 700 billion dollars is relative to the US economy. I am a little bit shocked that there was so little effect from this amount of money.

And there is this from Bloomberg…

The government is set to collect less money as revenue from energy exports grows at a slower pace and the central bank continues to spend its reserves to prop up the ruble amid global financial turmoil. Energy, including crude oil and natural gas, accounted for 73 percent of all exports to the Baltics and countries outside of the former Soviet Union through August.

“If the price keeps going down they will have to send the budget back to parliament looking for spending cuts,” said Vladimir Tikhomirov, the chief economist at UralSib Financial Corp. in Moscow, in a phone interview today. “Even in September the budget was still in surplus, so I don’t think there is a really big threat in the next three months.”

Given that we as Americans are used to running a deficit this might seem like nothing. But it is a stunning fall in government revenues in a short amount of time. This is far faster then seems justified by the drop in oil prices. I think the Russians must be hit hard by a production drop off as well as the falling prices. It is the only way I can account for how fast the government’s revenues are falling off the cliff.

These days it seems like history is moving too fast.

The Dow was up almost a 1,000 points today. Governments around the world have guaranteed with their lives that there will be no more problems. And I mean that in the most literal way possible. The sums that European Governments have thrown at the problem are out of this world. From Brad Setser….
The US and Click Here to continue reading.

From Naked Capitalism….

Hedge fund margin calls appear to be playing a role, perhaps a substantial one, in the precipitous fall in stock prices. One hedge fund manager told us yesterday that a West Coast hedge fund was supposed to have dumped a lot of risky fixed income positions late in the day yesterday. That affected the stock market over the fear that the distressed prices its paper was fetching would force banks and other financial firms to mark similar assets down, leading to further losses.

I thought as much yesterday, but today people are saying it everywhere. Admittedly there is no hard proof yet, but where there is smoke there is fire. At least that is how it has been so far.

From the Financial Post….

The credit crisis is spilling over into the grain industry as international buyers find themselves unable to come up with payment, forcing sellers to shoulder often substantial losses.

Before cargoes can be loaded at port, buyers typically must produce proof they are good for the money. But more deals are falling through as sellers decide they don’t trust the financial institution named in the buyer’s letter of credit, analysts said.

“There’s all kinds of stuff stacked up on docks right now that can’t be shipped because people can’t get letters of credit,” said Bill Gary, president of Commodity Information Systems in Oklahoma City. “The problem is not demand, and it’s not supply because we have plenty of supply. It’s finding anyone who can come up with the credit to buy.”

So far the problem is mostly being felt in U. S. and South American ports, but observers say it is only a matter of time before it hits Canada.

I not big fan of government intervention. But if they are throwing money around like water anyway, why don’t they backstop some of these letters of credit so people can get food?

From Naked Capitalism….

On the one hand, I was mystified that the stock market was up in the morning session given that the money market seize up was not at all improved and several key measures had worsened overnight. I was wiling to accept the view that we might have an oversold bounce and saw several bloggers indicate they had gone long in the last three days. But even with my bearish predisposition, given that the mess in the debt markets is now starting to engulf the real economy, I am still perplexed with the pattern of the last two days, with a plus 350 point end of session fall yesterday, and a roughly 600 point plunge today in the final hour.

From Felix Salmon….

I’ve long said that end-of-day market reports are silly, since the only thing reporters can normally say with any confidence is “the market moved and we don’t know why”. But what we’re seeing right now isn’t moves so much as fully-fledged earthquakes. Even during a bear market, you don’t expect three 700-point down days to come in quick succession like this: if anything, you expect big one-day rallies, followed by more grinding-yet-inexorable decline. The big one-day plunges happen at the top of bull markets, when bubbles burst. But we were already down 35% when the market opened today. Now we’re down 42%. Whatever that might be, it sure ain’t a bull market.

I think the hedge funds are blowing up myself.