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.

From CBS….

Saudi Arabia reportedly needs to sell oil for at least $55 dollars a barrel to cover the cost of running the country. Fossil fuels finance 75 percent of the country’s entire domestic spending budget, but oil is selling for below that breakeven price.

This metric is a little misleading. Saudi Arabia needs to sell a certain amount of oil at $55 dollars a barrel to fund their country. I have never seen anyone say what that amount is, but the point is an important one to remember. It is the reason that OPEC has little real pricing power in an economic downturn.

In theory OPEC can raise the price of oil just by cutting production. In fact, Saudi Arabia could do this all by themselves if they wanted to. The problem is that a price rise is not enough solve many oil producers funding problems . To keep from going broke, a lot of oil producing countries (Iran, Venezuela, Russia, among others) need a rise in the price of oil without demand destruction. In the current environment, that is a quite a trick to pull off.

That is why when Iran and others scream for OPEC to cut production they really mean that they want Saudi Arabia to cut production. They have no intention to cut production themselves. The Saudi oil minister Ali Al-Naimi makes this very point later on in the article saying….

“Iran tries to keep the price way up; and Venezuela’s trying to keep the price way up. You don’t consider that oil as a weapon?” Stahl asked.

“If you looked at these countries you just named, every one of them would like to sell every barrel they can,” Al-Naimi commented.

“At as high a price as they can get away with,” Stahl remarked.

“Right,” Al-Naimi said.

As a result of these kinds of games, I don’t see OPEC cuts as being very successful at raising the real price of oil anytime soon no matter what headline cuts they announce. Oh sure, the price might jump up and down some, but I don’t think you will see a sustained rise anytime soon (short of a war occurring).

However, in the long term, the real price of oil is going to rise. Simply put, if Saudi Arabia can’t support itself at the current price, no petro state can support themselves. That means that a lot of petro states are going to go bankrupt in the near future. Iran and Venezuela are in a particularly weak position with Russia and Mexico not far behind. The resulting chaos will drive prices back up. It may even drive them way up.

So enjoy the cheap gas you are going to get for the next year or so. It will not last.

Over at the Marginal Revolution, I got involved in a discussion about Obama’s stimulus plan. It got a little out of hand on my end.
I don’t have much use for Keynesian economic views. I still hold to views that I laid out here, although I would hope that if I had to write Click Here to continue reading.