From the Economist….

Instead of glass prisms, Icelanders are looking forward to a different Chinese cargo in the dying weeks of the year: fireworks. They set off more per person each new year than any other country in the world. Such is the demand that the Chinese manufacturers are making a special loan to Icelanders to buy them, according to a local newspaper.

Almost no other private creditor is lending them anything; Iceland has turned instead to the IMF.

This little throw away line buried in a story about Iceland’s problems demonstrates how insane the Chinese business model is. As the broader article makes clear, the other shoe has not dropped yet as far as Iceland is concerned. Iceland owes the world a lot of money that is never going to be repaid.

So what are the Chinese manufactures dong loaning money to Iceland for fireworks? I can only think that they are determined to keep their exports from dropping off. But really, how short sighted can you get? There is a reason why nobody else is loaning Iceland money.

From Alpha Sources….

On several occasions have we heard rants about the profligacy of the deficit nations and how, in more polemic circles, the surplus countries were holding the deficit countries by the, erm, b’lls. Of course, once you stop to think about it is not certain who is holding whose private parts here.

The point Claus Vistesen makes is basically the same one as I made here.

From Bloomberg….

For the burgeoning middle class, investments of choice range from electronics to gold jewelry. Evroset, Russia’s largest mobile-phone chain, is telling people to buy anything they can.

“It’s better to feel happy that you own something than to fear losing the money you have earned,” Chairman Yevgeny Chichvarkin says in a letter posted at 5,200 Evroset stores. “If you need a car, buy a car! If you need an apartment, buy an apartment! If you need a fur coat, buy a fur coat!”

Sales at Technosila, the third-biggest consumer electronics chain, have doubled since September as customers rush to swap rubles for flat-screen TVs and laptops, spokeswoman Nadezhda Senyuk said by phone from Moscow, where the company is based.

Jewelry sales are also accelerating, particularly items made of gold and diamonds, said Vladimir Stankevich, advertising director at Adamas, Russia’s third-largest jewelry retailer.

We are feeling lazy today. So you can learn most of what you need to know about today by reading this post from Macro Man and following the links.

Felix Salmon fills in more information on scandal that Marco Man mentions here and here.

Also, this is how the car makers are going to be bailed out now that the bailout has failed. Here is more.

From the Investor’s Business Daily….

After posting a surplus of 12.5% of GDP this year, and spending at least 4.5% of GDP on a stimulus package of soup kitchen offerings, Chavez is now down to his last $87 billion in reserves, having created nothing of permanent value. Next year, S&P estimates a wild swing into deficit by Venezuela, forcing devaluation.

Venezuelan oil prices are now $34 a barrel. Producing 2.3 million barrels a day, down 16% from 2005, and now consuming 795,000 barrels of that, as Caracas investment banker Miguel Octavio estimated on his blog, “The Devil’s Excrement,” he doesn’t even have enough earnings to finance imports. He’s given away about 424,000 barrels of oil output, and must make do on sales of about 1 million barrels. With oil down, Chavez has entered the worst phase of the oil cycle.

Its kind of funny that those nations who hoped for a sharp drop in America’s fortunes never took any steps to prepare for the very thing they were hoping for. Chavez’s only hope is that America will have a short recession.

From the Washington Post…

Faced with a sharp decline in revenue, National Public Radio said Wednesday it will pare back its programming and institute its first organization-wide layoffs in 25 years.

Washington-based NPR said it would lay off about 7 percent of its workforce and eliminate two daily programs produced out of its facilities in Culver City, Calif. The shows are “Day to Day,” which was aimed at younger listeners, and the newsmaker-interview program “News & Notes,” which NPR hoped would attract African Americans.

I expect that they will receive a bail out eventually.

From the New York Times….

So here’s a little experiment. Imagine that a Congressional bailout effectively pays for $10 an hour of the retiree benefits. That’s roughly the gap between the Big Three’s retiree costs and those of the Japanese-owned plants in this country. Imagine, also, that the U.A.W. agrees to reduce pay and benefits for current workers to $45 an hour — the same as at Honda and Toyota.

Do you know how much that would reduce the cost of producing a Big Three vehicle? Only about $800.

That’s because labor costs, for all the attention they have been receiving, make up only about 10 percent of the cost of making a vehicle. An extra $800 per vehicle would certainly help Detroit, but the Big Three already often sell their cars for about $2,500 less than equivalent cars from Japanese companies, analysts at the International Motor Vehicle Program say. Even so, many Americans no longer want to own the cars being made by General Motors, Ford and Chrysler.

(h/t Marginal Revolution)

From Bloomberg….

Treasuries rose, pushing rates on the three-month bill negative for the first time, as investors gravitate toward the safety of U.S. government debt amid the worst financial crisis since the Great Depression.

Calculated Risk says…

My guess is the banks are parking the TARP money in short term treasuries – and that has pushed the yield to zero.

If I knew for a fact that this was true, I would be rolling around on the floor laughing. Just think about it, the government borrows a whole lot of money to bail out the banks and what do the banks do? They loan it back to the government.

A lot of people are going to use this as proof that we are in a deflationary spiral. But I would bet dollars to dimes that this is not the case. I expect the price of treasuries to drop as fast the price of oil did.

Think about it. A lot of oil producers are going to have to start selling off their reserves to maintain themselves in the style to which they have become accustomed. Russia has already started to do this. I expect that China will have to slow down on the purchases of treasuries if not halt them completely within the next six months. These factors combined will cause interest rates on treasury bills to shoot up.

Then the fun will really start. But on the bright side, I don’t think people will be worried about deflation anymore.

This is the crude truth. (H/T Megan McArdle)

Here is the real explanation if you want it.

Yesterday, I talked about how oil prices were to low to fund to the budgets of most petro states. Today, Brad Setser examined the question.