RUSSIA AND SOUND ECONOMICS JUST DON'T MIX:

The latest news is that Russia's banks are going to need a bailout, and soon. The interest rate they charge each other on short-term loans--which shows how much they believe in each other's solvency--shot up to 28.3 percent on Thursday, higher than it was even during the 2008 crisis. And, to give you an idea how big the black hole in Russian bank balance sheets must be, this is all happening despite the fact that the central bank just said that banks could pretend that they don't have losses. Okay, it didn't exactly say that, but close enough. Specifically, Russian banks can stop marking their losses to market, and use the old exchange rate to calculate the "value" of the assets on their books. Potemkin balance sheets, though, aren't enough to fool the bankers themselves. They know how screwed their banks are, so they don't trust any others. The Russian government is going to have to inject money--and real money, like dollars--into the banks to end this credit crunch.

That's money that Russia is going to start running out of. It spent $80 billion unsuccessfully defending the ruble this year, and although it has over $400 billion left, only half of that may really be useable.

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