The Year of the Ox starts Jan. 26. An "ox," according to Webster's New World College Dictionary (4th edition), is "esp., a castrated, domesticated bull (Bos taurus), used as a draft animal."

In a recent report predicting that Southeast Asian stocks will make a limited comeback this year, CIMB-GK Research analyst Toh Hoon Chew wrote:

The year of the castrated bull seems appropriate given our expectations for 2009.

But some are still hoping for a virily bullish year in the stock markets. South Korea's Financial Services Commission chairman, Jun Kwang-Woo, second right, adorns a bull with a crown of flowers to celebrate the 2009 opening of the stock market at the Korea Exchange (KRX) in Seoul on Jan. 2.

Meanwhile, the folks at the Tokyo Stock Exchange seem to have the ox theme down. Kimono-clad women and a cuddly, cartoon-like ox celebrate the first day of 2009 trading today, Jan. 5.

For much of late 2007, Belgium looked like it was on the verge of being split in two as Flemish and Wallonian politicians struggled to form a government that would preserve national unity. At one point, erstwhile Prime Minister Yves Leterme even said that there was nothing holding the country together but "the king, the football team, some beers."

Now, Leterme has been forced to step down, along with his entire government, not because of nationalist sentiment, but because of an old-fashioned banking scandal. Leterme and his ministers are accused of applying undue pressure to push through a bargain-basement sale of Belgium's partially-nationalized bank Fortis to the French bank BNP Paribas, at the expense of Belgian workers and shareholders. King Albert is now struggling to find a prime minister who is both untainted by "Fortisgate" and capable of keeping the fragile Flemish-Walloon coalition intact. No easy task.

The financial crisis and government responses seem to be having interesting effects on nationalist sentiment in Europe. In Scotland, nationalist parties saw their cause set way back by the UK government's massive bailouts of Scottish banks, which made the idea of Scottish self-sufficiency look patently ridiculous. In Belgium, it seems like Flemish nationalists could be emboldened by the central government's failure and will likely continue to make the case that the poorer French-speaking Wallonia is a drag on the national economy. This could make keeping the place intact all the more challenging.

Via Japan Probe, a Hilton in Osaka is offering guests a chance to use the yen's rise against the dollar to their advantage. The price in yen "$80 party" package fluctuates daily based on exchange rates. So if you reserve a party, expecting the value of the dollar to stay low, you can get a pretty good deal.

Here's what you get for your money (in Japanese):

 

This month marks the 30-year anniversary of economic reforms launched by late Chinese leader Deng Xiaoping that have turned China today into one of the most powerful countries in the world. In late 1991, the New York Times reported that Deng told China's Economic Daily:

In the end, convincing those who do not believe in socialism will depend on our nation's development. If we can reach a comfortable standard of living by the end of this century [the 20th], then that will wake them up a bit. And in the next century [the 21th], when we as a socialist country join the middle ranks of the developed nations, that will help to convince them. Most of these people will genuinely see that they were mistaken.

Fast-forward to 2008: China has been doing astoundingly well, but people in developed countries aren't exactly admitting to being mistaken about socialism. Rather, "communist" China has learned how to play the capitalist game -- well.

To see a timeline of China's economic advances during the past three decades, check out FP's latest photo essay, "China's 30 Years of Economic Overdrive."

AFP/Getty Images, China Photos/Getty Images

Ecuador, surely the first of many countries to do so in the months ahead, is defaulting on its debt. And who does President Rafael Correa blame for this parlous state of affairs? The lenders, whom he calls "monsters" whose loans are "obviously immoral and illegitimate."

Hmm. Too bad Correa has alienated Uncle Sam. Maybe his friend Mahmoud Ahmadinejad will help? Surely Iran has the clout to convince lenders to agree to new terms, no?

In any case, here's a possible side effect of Ecuador's default: prices of bananas may go up. Seriously -- Ecuador is literally a banana republic, and agriculture is a business fueled by credit. And after this move by Correa, it's going to be awfully expensive to borrow money in Quito.

UPDATE: Felix Salmon says the default is "idiotic":

In the annals of idiotic political decisions, today's default by Ecuador has to rank pretty high. [...] This debt has already been restructured twice, and there's zero chance that bondholders will agree to it being restructured a third time. They know that Ecuador has the ability to pay, and they don't like being bullied.

Photo: AFP/Getty Images

Political scientist Gustavo Coronel, an oil expert and former member of the Venezuelan congress, believes the plummeting petroleum payouts will seal the fate of Hugo Chávez's Bolivarian dreams, thanks to the Venezuelan leader's habitual failure to invest in any form of state infrastructure.

Speaking at the Andes colloquium organized by the George Washington University and the Strategic Studies Insitute, Coronel explained just how deep mismanagement runs within the state-run oil sector. This threw me for a bit of a loop:

"Under Chávez the company [PDVSA] has lost about 500,000 barrels per day of production capacity, which amounts to a loss of income of about $30 to $50 million a day, depending on the price."

Ouch. Today, a barrel of crude petroleum is at a mere $39 on the Venezuelan market, down from soaring highs of roughly $145 earlier in 2008. To Coronel, this reality merely exacerbates the "termites" that have been eating the regime from within.

Coronel outlined three steps Chávez will now be forced to take, which may ultimately lead to his downfall:

1. Cutting his vast handouts to Venezuela's poor constituents, thus isolating his key demographic.
2. Eliminating/reducing foreign aid to sympathetic governments, who remain essential for his regional opposition to the United States..
3. Devaluing the Bolivar, inflicting further economic woe upon an economy already reeling from stark inflation and lack of foreign investment.

Having taken these steps, Coronel predicts Chávez will not only lose a constitutional referendum that would permit indefinite reelection -- similar to the failed attempt to ratify the country's constitution by popular vote in December 2007 -- but also fizzle well before his current term runs out in 2012.

Whenever he's suffered setbacks in the past, Chávez has always promised to accept the situation 'Por ahora' (For now). Save a petro rally, por ahora might be a while.

Photo: JUAN BARRETO/AFP/Getty Images

A very sad story from the Washington Post's Philip Pan:

[W]hen he heard radio ads two years ago encouraging citizens to invest in the initial public offerings of state-owned companies, Sisoyev lined up to buy shares, first in the oil-and-gas giant Rosneft and a year later in the nation's second-largest bank, VTB.

Sisoyev had suffered in Russia's rocky transition to capitalism, but the "people's IPOs," as they were billed by the Kremlin, seemed different. Then-President Vladimir Putin endorsed the stock offerings, presenting them as a chance for ordinary Russians -- and not just the wealthy -- to own a piece of the booming economy.

Now, as Russia confronts its worst economic crisis in a decade, the value of Sisoyev's shares has plummeted, wiping out most of his life savings. At 65, he is working as a part-time security guard because food prices are climbing faster than his meager pension.[...] "I believed in the state, especially under Putin, so I bought shares," said Sisoyev, a soft-spoken man with white hair and a soldier's posture. "Now I don't believe in anything."

As predicted, Russia's financial crisis is starting to hit main street and it's going to take more than emergency loans to oligarchs to keep the public's trust.

Looking for a safe harbor to park your cash? Invest in Korean ramen. Bloomberg:

[South Korea's] economic woes are helping sales of instant noodles called "ramyeon," which typically cost about 68 cents a pot. Sales rose 38 percent in October compared with the same period last year, according to the 24-hour convenience store chain FamilyMart. Shares of Nong Shim, which makes the nation's best-selling brand of ramyeon, gained 17 percent in the past month.

Sales of cigarettes and condoms are up, too.

Over at Slate, CFR's Michael Levi explains one big reason why the UN climate talks currently under way in Poznan, Poland have hit the skids. The UN climate change regime apportions different levels of responsibility to rich and poor countries, but the way it makes that distinction if very odd:

The United Nations first divvied up the developed and developing world for climate talks in 1992, with the goal of using that split to apportion responsibilities for cutting emissions. But distinctions that once made sense are no longer tenable. Ukraine, for example, is considered rich. In 1992, it was reflexively lumped together with the countries that once comprised the powerful Soviet Union; by 2007, its citizens had fallen to 97^th richest in the world by GDP per person. (All wealth figures cited here are from The CIA World Factbook.) At the same time, Singapore (now the sixth-richest nation in the world) was designated as poor. Unless the climate regime overhauls its wealth labels, a country like Singapore could reap the benefits of financial aid, while Ukraine would be burdened with emissions caps. Needless to say, that kind of nonsensical setup won't get you very far in international talks. [...]

The resulting deal had its flaws then. It makes absolutely no sense today. Belarus, for example, is lumped together with the rich countries, despite a GDP per person of about $10,000. As a result, it has an emissions cap like those in place for Europe and Japan. Kuwait, meanwhile, is considered poor. That means the oil-rich emirate is spared any obligations, despite the fact that its residents are about five times wealthier than the Belarussia.

Not surprisingly, the "poor" countries aren't in much of a hurry to change this set-up. Any regulatory system that has Singapore crying poverty is probably in need of reform.

Germany's finance minister, Peer Steinbrück, finds Britain's stimulus plan distasteful:

"Our British friends are now cutting their value-added tax. We have no idea how much of that stores will pass on to customers. Are you really going to buy a DVD player because it now costs £39.10 instead of £39.90? All this will do is raise Britain’s debt to a level that will take a whole generation to work off.

"The same people who would never touch deficit spending are now tossing around billions. The switch from decades of supply-side politics all the way to a crass Keynesianism is breathtaking."

Steinbrück may be forced to hold his nose when German bankers, ministers, and economists meet next week to discuss their own stimulus measures. Chancellor Angela Merkel is said to be moving closer to the British position.

When we put together our list of the worst predictions of 2008, one strong contender was the Economist's assertion from last March that "decoupling is no myth. Indeed, it may yet save the world economy." (It was eventually edged out by the same magazine's early enthusiastic praise for Kenya's election.) Paul Krugman's already skewered the decoupling editorial, which argued that developing economies had become self-sufficient enough that they would be able to weather the decrease in demand for imports from the developed world.

As the Financial Times's Krishna Guha points out today, the World Bank's just-released Global Economic Prospects 2009, puts the final nail in decoupling's coffin:

Import demand is projected to decline by 3.4 percent in high-income countries during 2009, while net private debt and equity flows to developing countries are projected to decline from $1 trillion in 2007 to about $530 billion in 2009, or from 7.7 to 3 percent of developing-country GDP.

As a result, investment growth in developing countries is projected to slow dramatically, rising only 3.5 percent in middle-income countries, compared with a 13.2 percent increase in 2007.

I'm hoping I'll be able to dust this report off for next year's worst predictions list but I kind of doubt it. Plus, Daniel Drezner thinks the World Bank is being way too optimistic.

NPR has an interesting piece on China's recent moves to prop up small coastal export businesses who are hurting with the slowdown in demand from the United States this holiday season:

Official statistics show that thousands of factories in Guangdong province have gone bankrupt this year. In the latest flare-up of unrest, laid off toy factory workers protested in Dongguan on Nov. 25, flipping police cars and smashing company offices.

This has Beijing worried. It has decided to protect exports by increasing export tax rebates and halting the three-year-long appreciation of China's currency against the dollar. And local governments in the delta have used billions of dollars to bail out small and medium enterprises.

China's top economic planner, National Development and Reform Commission Director Zhang Ping, defended the bailouts at a recent press conference.

"Helping these companies get through their current difficulties is entirely necessary and appropriate," Zhang said. "Otherwise, if too many factories go bankrupt, it will lead to many workers losing their jobs, and could increase social tensions and unrest."

On the other hand, Marketwatch reports that the country's growing golf sector was not so lucky:

Mission Hills, the self-proclaimed biggest golf club on Earth and recent host of the World Cup of Golf event, is sacking 2,000 employees, or 20% of its staff, according to a recent Bloomberg news report.

Yes, that's right. A golf course had 10,000 employees. At what point could a golf course be "too big to fail"?

(Hat tip: China Digital Times)

Vladimir Putin seems to have just discovered how international financial markets work and he doesn't like it:

Decisions concerning which securities to buy or sell on Russian markets are, for the most part, made abroad. Moreover, the criteria by which these decisions are made have very little connection to the actual state of our economy or Russian companies... This is some kind of ugly thing, absolutely unfair."

Putin went on to say that Russia is in no way planning to "limit the activities of foreign capital in the Russian stock market" but was working on a "comprehensive plan" to build a Russian investor class and make the country less vulnerable to economic downturns.

Yes, Vladimir Vladimirovich, attracting international investment without any risk from international markets certainly would be nice.

Bloomberg reports that the latest prophecy from Jim O'Neill, the Goldman Sachs economist who coined the term "BRIC countries" (Brazil, Russia, India, and China), is that "the BRIC consumer is going to rescue the world." He believes that emerging economies are well-positioned to pick up the slack in consumer demand during this downturn, citing, for instance, the spending power of the Chinese consumer and recent economic stimulus measures by the Chinese government.

This is a pretty bold thing to say. While it's encouraging to see that Chinese retail sales were up 22 percent in October, we've yet to see how China's economic slowdown will flow through to the wallets of Chinese consumer. As I discussed a few weeks ago, it doesn't seem clear that China's economic stimulus plan even seeks to boost consumer demand. Over in Russia, we don't yet have a sense of how plummeting oil prices will affect economic growth as a whole, and, as a consequence, we don't know how consumers will fare. The same uncertainty holds for consumers in Brazil and India, as investors have fled emerging markets for safe havens like the dollar and, in doing so, weakening those economies.

In the long run, the conventional wisdom may hold that two billion-plus people in China and India alone means more than four billion socks to sell, but consumer spending could grow more muted in those parts of the world too in coming months.

Simone Wallmeyer, the face of the global financial crisis, looks like she's in a slightly better mood today:

Stock brokers go about their business at the stock exchange in the central German city of Frankfurt/M. on November 24, 2008. The DAX reacted positively to the US government's promise to guarantee hundreds of billions of dollars of the banking giant Citigroup's debt in a massive new bailout ahead of new global moves to lift the world economy.

Last time we checked in with the reliably buffoonish Russian ultra-nationalist leader Vladimir Zhirinovsky, he was engaging in fisticuffs with his political rivals on live TV. But despite his surly temperment, corruption, and overt racism, Zhirinovsky's might still mean well after all. Check out the personal finance advice he gave in an interview with RIA-Novosti (via Johnson's Russia List):

"I have been thrifty. I am not having my hair cut. My hair has already grown longer than ever. I only shave every other day. I eat very little. I never go out. I never invite anyone over to my place. I don't buy presents for anyone and I am asking people not to buy anything for me. I am not travelling anywhere," he said.

Zhirinovskiy recommended "saving reasonably" and said that this would result in reduced spending. He made several suggestions: "There is no need to buy new clothes. They can be swapped with others. I am prepared to give a couple of suits to someone, several pairs of shoes, a wristwatch. Why go shopping? Turn to each other to get what you would otherwise have to get from a shop."

Zhirinovskiy also said there was no need to spend money on personal hygiene products because "all these are chemical and hazardous". Fewer newspapers should be bought because the same newspaper can be shared "by all next-door neighbours" or perhaps "the entire block", he continued.

"As for Christmas celebrations, there is no need to travel abroad or to go to a restaurant. Stay in Moscow, stay at home or invite yourself over to someone else's place."

Something tells me Zhirinovsky's friends might not be so welcoming when he shows up uninvited to their Christmas party without having used personal hygiene products for several weeks.

Photo: Epsilon/Getty Images

Barack Obama, unfortunately, has a lousy record on ethanol subsidies. But now that he is no longer representing a corn state, perhaps he will listen to his new economic advisor, Larry Summers:

Appropriate steps include reform of misguided ethanol subsidies that distort grain markets to minimal environmental benefit, allowing farm land now being conserved to be planted[.]"

Curious about what's going on in the photograph above? To find out, check out FP's latest photo essay, "Gaza's (Literal) Underground Economy."

Photo: Abid Katib/Getty Images

Bloomberg does the math on what the U.S. federal government has committed so far for various bailout/rescue efforts:

The U.S. government is prepared to lend more than $7.4 trillion on behalf of American taxpayers, or half the value of everything produced in the nation last year, to rescue the financial system since the credit markets seized up 15 months ago. [...]

The money that’s been pledged is equivalent to $24,000 for every man, woman and child in the country. It’s nine times what the U.S. has spent so far on wars in Iraq and Afghanistan, according to Congressional Budget Office figures. It could pay off more than half the country’s mortgages.

UPDATE: Bloomberg now saying the correct figure is $7.7 trillion.

The Wall Street Journal has a banner reporting that Tim Geithner will be Barack Obama's Treasury Secretary. And CNN says, "Wall Street rallies on reports that Obama will tap NY Fed President Timothy Geithner as Treasury Secretary. Dow jumps 260 points."

I'll update as the news comes in.

Jonathan Weisman:

New York Federal Reserve Bank President Timothy J. Geithner is to be nominated as President-elect Barack Obama's Treasury secretary, according to a person close to the transition process.

The Federal Bureau of Investigation began calling Geithner confidants this week, starting a vetting process of getting the economist and Fed veteran in place almost as soon as Mr. Obama is inaugurated the 44th president.

Mr. Obama plans to introduce his entire economic team early next week, hoping to sooth the roiling financial markets and answer rising pressure on the president-elect to become more involved.

Here's more from the WSJ:

• Who is Timothy Geithner?
• Will Geithner at Treasury Keep Fighting For the Fed?
• Geithner at Treasury? A Look Back in His Own Words