From The Guardian…..

Wu is one of 160,000 collectors in Beijing who make a living from the detritus of urban life – plastic sheeting, office printouts, bottles, radiators and scraps of cardboard. Recycling has become a global industry and China is the largest importer of the world’s waste materials, taking in as much as a third of Britain’s recyclables for example. Then came the slump, decimating the Chinese recycling industry and leaving Britain, the US and others grappling with growing volumes of recycled waste and nowhere to send it.

“It’s a canary in the coalmine: it’s the front and back end of industry,” said Adam Minter, who runs the Shanghai Scrap blog and specialises in the metal trade. “Until about eight weeks ago, for example, the entire [US] west coast paper market was sent to China and most of it was sent south. It was processed and made into packaging for products that then shipped back to the US … But when US consumer demand dropped off, that broke the cycle.”

Never realized before that the US sent so much of its recyclables overseas to be processed.

From Brad Setser….

The same story applies to the official sector as a whole. Central banks sold $26.2b of long-term Treasuries, but added $66.6b to their short-term Treasury holdings. Net central bank holdings of Treasuries — judging from the TIC data — rose by $40.4b. That is consistent with the $49.1b rise in the Fed’s custodial holdings of Treasuries. Central banks by contrast are reducing their holdings of short-term and long-term Agencies. They sold $14.3b of long-term Agencies, and their short-term holdings likely fell by a comparable amount.**

Selling long dated treasuries in exchange for short dated Treasuries is a sign that they think interest rates will rise in the near future. Otherwise the move does not make any sense at all in this environment. What do they know that we do not?

From the Deal Journal (A WJS blog)….

Many of the problems originated at Merrill Lynch, which had a loss of $15 billion in the quarter, or three times worse than the last quarter. “To put [the] $15 bn after-tax [loss] in perspective, 60% of the common equity base of the company was lost in one quarter,” Goldman Sachs research analysts noted wryly in a research report this morning.

Felix Salmon has some questions.

Since Bank of America is bailing out/buying Merrill Lynch, you should also read “WSJ: Bank of America to Receive $20 Billion Injection, Support for $118 Billion of Loans” from Naked Capitalism to get a better idea of the extent of this mess.

From CNBC……

Electronics retailer Circuit City Stores reached an agreement with liquidators on Friday to sell the merchandise in its 567 U.S. stores after failing to find a buyer or a refinancing deal.

The company – which had been the nation’s second-biggest consumer electronics retailer, employing about 35,000 employees – appointed Great American Group, Hudson Capital Partners, SB Capital Group and Tiger Capital Group as liquidators.

From Reuters……

New efforts to break the deadlock between Russia and Ukraine and restore gas supplies to freezing European countries were planned on Friday, with the intervention in the dispute of a consortium of energy firms.

Paolo Scaroni, chief executive of Italian energy giant Eni SpA (ENI.MI) said late on Thursday the consortium would provide gas necessary for technical reasons to get pipelines and pumping stations working again.

The move could allow gas supplies to Europe to get under way immediately, leaving the question of reimbursement for the consortium’s gas on hold until an agreement between Ukraine and Russia on their price dispute is reached.

Meanwhile, an official from Gazprom explains their point of view on the Wall Street Journal.

From Calculated Risk comes a pretty graph showing how badly retailed sales collapsed in December.

Meanwhile, the Telegraph reports….

The OECD’s gauge of “Leading Indicators” – which gives warning of trend changes a few months in advance – shows an abrupt rupture in Asia and among commodity producers, with the most damage surfacing in countries with an export surplus that depend on sending goods abroad.

The index for Russia has seen the sharpest slide, falling 4.3 in November, China fell 3.1 and Germany was down 2.0, the worst performer in the G5 bloc for the third month in a row.

In other words, the worlds biggest net exporters are being hammered. You would think that at least the Gulf States would be setting pretty. After all, oil prices were sky high for most of last year. But Brad Setser says….

– The capital losses on the Gulf’s existing portfolio overwhelmed large inflows from high oil prices in 2008. Close to $300 billion flowed into the big Gulf funds — the Abu Dhabi Investment Authority/ Abu Dhabi Investment Council, the Kuwait Investment Authority, the Qatar Investment Authority and the Saudi Arabian Monetary Agency’s foreign assets. But the market value of their Gulf’s foreign portfolio fell by an estimated $350 billion over the course of 2008. Throw in a roughly $30b fall in the Gulf’s reserves as hot money betting on a revaluation left and the total value of the Gulf’s external assets likely went down over the course of 2008.

From Felix Salmon…..

Both Citigroup and Bank of America are down more than 20% in early trade today, and I imagine that Hank Paulson and Tim Geithner are starting work on yet another weekend deal of some description, since at this rate it seems that neither institution is capable of surviving in its present form much longer. They should embrace the inevitable and just nationalize the two banks.

The Economics of contempt has more. But I am not sure he is right that only Bank of America has problems. But recent news stories do make it seem that Bank of America is the most desperate right now.

But all the banks seem to be in big trouble right now. Look at this from Calculated Risk.