Gloomy forecasts from the IMF today: Developed economies will shrink by 0.3 percent next year, the first collective contraction since 1945.

More analysis from the WSJ's economics blog:

The U.S. forecast was cut to 1.4% growth this year and a 0.7% contraction in 2009, down from last month’s estimates for growth rates of 1.6% in 2008 and 0.1% in 2009.

The euro area is expected to grow 1.2% this year and contract 0.5% next, compared with the previous forecast for growth of 1.3% in 2008 and 0.2% in 2009.

Japan’s estimate was trimmed to 0.5% growth this year and a 0.2% contraction next, compared with the previous estimate for growth of 0.7% in 2008 and 0.5% in 2009.

Forecasts for emerging and developing economies were adjusted even more sharply, with the 2008 growth estimate falling to 6.6% from 6.9% and the 2009 forecast dropping to 5.1% from 6.1%.

Russian President Dmitry Medvedev, the world's most powerful vlogger, has a new post up previewing Wednesday's highly-anticipated state-of-the-nation address:

Among other topics, Medvedev intends to address the international financial crisis, which he says began "in the United States of America and which, unfortunately, has spread throughout the world and affected almost all countries."

If his previous comments are any indication, Medvedev can be expected to take a hard anti-American line when discussing the global economic situation. The Russian government's opponents may see the crisis as an opening, but the Kremlin message machine has been working overtime to portray it as a foreign problem and an opportunity for Russia. It should also be interesting to see if Medvedev will mention the newly elected U.S. president in the speech.

Stay tuned.

When economic times get tough, sounding out of touch on pocketbook issues can debilitate even the most nimble politician. Just ask Taro Aso. The Japanese prime minister was already being pilloried as an elitist over his hotel bar tab and his epicurean tastes. So you'd think he'd be extra careful to avoid a pocketbook gaffe, right?

Wrong. Now, Aso has bungled a key question for any Japanese politician: What's the price of a cup of instant noodles?

Aso said: 'I think it used to be very cheap, but now it costs around 400 yen (4.12 dollars), doesn't it?'

An opposition lawmaker immediately retorted that a cup of instant noodles -- popular with Japanese on a tight budget -- actually costs around 170 yen.

Aso admitted with a wry smile: "I don't buy them myself these days."

Granted, it's better to err on the high side in making these sorts of seat-of-the-pants estimates. But what's with the gratuitous remark there at the end? It's almost like he's trying to give the opposition a boost.

As for this ill-timed photo op from earlier today, it's just icing on the cake:

John Stillwell-pool/Getty Images

Johannes Simon/Getty Images

The party's over. As the economy fizzled out and the housing bubble burst, champagne sales fell 2.6 percent in the first half of this year, compared with last year. It's the first time sales of bubbly have declined since 2000, according to the Comité Interprofessionnel du Vin de Champagne. In the United States, sales fell 22 percent in the first half of 2008.

There are at least a couple of places where people are still heartily toasting success, however: Russia, where champagne sales increased 158 percent last year, and China, which had a 74 percent increase amid the growing popularity of wine there.

Economic development blogger Chris Blattman has posted an interesting interview with Raymond "Ray" Fisman and Edward "Ted" Miguel, authors of "How Economics Can Defeat Corruption" in the September/October issue of FP:

[Chris]: Economists are fond of saying that strong institutions are at the heart of American economic growth. I say they should watch 'Gangs of New York' -- Scorsese makes Lagos and Nairobi look like kindergarten by comparison. Do we underplay violence and corruption in our own history, and overplay it in Africa today?

Ted: Yes, we could easily have written a book about violence and corruption in 19th century America or Europe. And there are surely lessons to be learned about present-day problems from looking at that earlier era, and vice versa.

Ray: But there are some highly instructive differences. In the 1970s, Sierra Leonian President Siaka Stevens destroyed the railroad in his country's southeast as a means of weakening an opposing ethnic group, the Mende. Contrast this with the equally corrupt robber barons of 19th century America, who used their power to build railways instead of tearing them down.

 

Fisman and Miguel have also started a promising-looking blog on the site for their new book, Economic Gangsters: Corruption, Violence, and the Poverty of Nations, on which their FP article was based.

FILE; SHAUN CURRY/AFP/Getty Images

How many generals would put meeting with development and finance experts as one of the top items on their to-do list?

My guess: not many. Which makes Gen. David Petraeus, who is gearing up to take the reins at Central Command later this month and putting together a 100-day review of U.S. strategy in the region, all the more impressive.

In what I see as a very encouraging sign, Petraeus reached out to officials at the World Bank and the International Monetary Fund last week, Bank President Robert Zoellick reportedly among them. A source close to the general told Reuters that the meeting's purpose was "to touch base and note the Central Command's interest in supporting comprehensive approaches in Pakistan, Afghanistan, and others."

With Pakistan melting down and Afghanistan fast becoming a Taliban paradise, a change in strategy couldn't happen soon enough.

RIZWAN TABASSUM/AFP/Getty Images

Do we need another secret intelligence assessment to tell us that Pakistan is falling apart?

No.

If anything, that country's slow-motion collapse been reported to death over the past several months. Nonetheless, it's reassuring that the situation there is getting high-level attention in Washington.

Much has been made of Pakistan's troubles with terrorists and tribal militants, and there are lots of good ideas out there for how to address them. Less discussed? The country's economic meltdown.

As Fasih Ahmed reports for Newsweek, Pakistan's economy is in "free fall." The country's credit ratings are being slashed; creditors are making runs on banks; inflation is soaring; and capital is fleeing. If things continue to get worse, we may come to find that -- while the two issues are certainly related -- the global financial crisis did to Pakistan what the terrorists never could.

Too many bank failures and bailouts to keep track of as the financial pandemic makes its way around the globe? Try this new interactive global credit crisis map from Reuters, which shows countries that have been impacted and what measures they've taken in response:

Reuters

Brent Stirton/Getty Images for the GBC

Along with many other aspects of customer service, U.S. debt collection has been outsourced to Indian call centers. As Emily Wax reports in a great piece for the Washington Post, the collection agents, who adopt fake American names and accents when talking to customers, have a unique perspective on the U.S. mortgage meltdown:

The subculture of call centers tends to foster a cult of America, an over-the-top fantasy where hopes and dreams are easily accomplished by people who live in a brand-name wonderland of high-paying jobs, big houses and luxury getaways.

But collection agents at this call center outside New Delhi are starting to see the flip side of that vision: a country hobbled by debt and filled with people scared of losing their jobs, their houses and their cars.

"Lately, 25-year-old Americans are telling me that they are declaring themselves bankrupt," said Chaturvedi, raising her eyebrows in shock. "These days the situation is so emotional, so fragile. We have to have so much empathy and patience."

"It's like people are totally drowning," said Omkar Gadgil, 24, who goes by the alias Richard Rudy and was a math major in college. He is brainy and considered the office expert on the intricacies of debt collection. "There has just been years of overspending and now: the crash."

In the past, debt-saddled customers were often annoyed by Chaturvedi's calls from the open-air office at Aegis BPO Services. But now they seem depressed, defeated. Even the men sob into the phone, several agents said.

Sadly, I have a feeling that these customers would be pretty enraged if they realized where the sympathetic voice on the phone was coming from. In moments of severe economic distress, people tend not to marvel at the wonders of globalization.

Phil Walter/Getty Images

"A funny thing happened to me this morning …", writes Paul Krugman on his blog today.

The Princeton economist and New York Times columnist was being coy. Turns out he won the Nobel Prize for his work on strategic trade theory and economic geography. Matt Yglesias wonders if Krugman is the first blogger to win a Nobel. Good question. I don't suppose Gary Becker counts, since his 1992 prize predates the Becker-Posner blog by nearly 12 years.

The Marginal Revolution guys are all over this. Here's Tyler Cowen's exhaustive summation of all things Krugman, and his colleague Alex Tabarrok has a useful primer on Krugman's contributions to trade theory. It's must-reading for those who know Krugman only for his left-leaning Times columns.

As Cowen notes, the timing of Krugman's award, like Al Gore's Peace Prize last year, is going to be interpreted as a public attack on the policies of the Bush administration. Krugman's politics aside, he's part of the growing trend (which includes Cowen and Tabarrok) of economists writing and blogging for a mass audience. As someone who's continually fascinated, but frequently perplexed by the dismal science, it's good to see this trend rewarded.

Then again, who cares about the Nobel Prize, anyway?

As the global economy implodes, two items have been selling well in Britain:

iStockPhoto.com

1. Safes. Stocks are crashing; banks are failing. "Home may increasingly be where the cash is," CNN reports. One British safe salesman says sales of safes have been up as much as 45 percent in the past two to three months.

2. Luxury chocolate. Selfridges, a British department-store chain, says its sales of premium chocolate are "breaking all records." Sales of the ultimate comfort food have increased 20 percent in the past four weeks. This week Selfridges launched "Credit Crunch," a treat of Valrhona chocolate coated over honeycomb.

If a stock market falls, but no one hears about it, did it really happen? That seems to be part of the Kremlin's strategy for addressing Russia's jittery economy. The Moscow Times' Anna Smolchenko reports that state television channels have been instructed to downplay the severity of the financial meltdown:

The main channels have either downgraded or ignored altogether Russia's financial turmoil since it began in mid-September, according to media monitoring companies and research by The Moscow Times. On Monday, for instance, none mentioned the meltdown in Russia or any possible repercussions from the crisis. Only the smaller Ren-TV and Zvezda channels mentioned the stock plunge, according to Medialogia, a private company that tracks the media. [...]

The Kremlin recently instructed both state and privately owned television channels to avoid using words like "financial crisis" or "collapse" in describing the turmoil in Russia, said Vladimir Varfolomeyev, first deputy editor at Ekho Moskvy radio.

"Specifically, the blacklist includes the words 'collapse' and 'crisis.' It recommends that 'fall' be replaced with the less extreme 'decrease,'" Varfolomeyev said in comments posted on his LiveJournal blog late last week.

The media blackout is similar to those employed during the Beslan school massacre of 2004 and the sinking of the Kursk submarine in 2000. When TV channels have mentioned the crisis, it has been in the context of American and European financial woes, such as President Dmitry Medvedev's speech yesterday which blamed the crisis on the U.S. "unipolar economic model."

With surprising candor, Kremlin PR reps say they're just trying to prevent public panic and point out that anyone who actually wants to hear about the crisis can read about it online or in more upscale newspapers. But when the fallout from Wall Street inevitably hits Russian main street, a lot of folks are going to be wondering what hit them.

Capitol Hill seemed like the center of the universe last night as U.S. senators scrambled to save U.S. workers, students, and Joe Sixpack from financial disaster. But what about the other constituents of America's economic domain? I'm talking about other countries. How have they reacted to this spiraling crisis? Let's take a look at a few major players:

I use a 1-5 scale to indicate how urgent the crisis is for a country -- 1 means not at all concerned, and 5 represents hair-on-fire panic.

Japan (3)

Japanese Finance Minister Shoichi Nakagawa is not worried:

I understand that the impact (of the financial crisis) on the Japanese economy is very small compared to that in the U.S. and Europe," Nakagawa said. "I expect the Japanese markets to undergo a thorough risk analysis and act calmly."

While the government of the world's No.2 economy is closely monitoring the situation and does urge swift approval of a bailout by the U.S. Congress, some also believe the crisis is a golden opportunity for Japanese banks to expand their international influence. Nomura Holdings has already picked up Lehman Brothers' Asia operations and Mitsubishi UFJ Financial Group is slated to become Morgan Stanley's largest shareholder. Japanese banks will probably be on the prowl for more good deals.

Continental Europe (4)

There would be something comical, even pleasurable, in watching the frenetic agitation of the banking world," wrote Laurent Joffrin, editor of Libération newspaper, “if millions of jobs were not at stake, not to mention the economic balance of the planet.

"Schadenfreude" is on everyone's lips, of course in Germany, but especially in France, as the above comments, quoted by The Economist, show. Sentiments are deeply conflicted though. Political leaders feel vindicated about the misgivings they've held about "Anglo-Saxon" free markets, but are struggling to contain knock-on effects from the U.S. crisis since European markets are so tightly intertwined with those of the United States.

For French President Nicolas Sarkozy, "the idea that markets are always right was a mad idea." But he has personally striven to promote more competition in France and is likely to pursue regulatory reform, rather than a rollback of market liberalizations.

"The U.S. will lose its status as the superpower of the global financial system." This is the view of German Finance Minister Peer Steinbrück, who gave an "impassioned" speech at the Bundestag last week denouncing American greed and regulatory failures. Major German newspapers are guarded, though. Some accuse Steinbrück of using the United States as a scapegoat for Germany's slowing economy and most are generally supprotive of swift action by both U.S. and German politicians.

Britain (5)

With a string of bank failures, a gummed up credit market, and housing woes of their own, British authorities are moving to ensure financial stability at home, but are also looking to Washington for leadership. Deposit insurance has been upped from £35,000 to £50,000. David Cameron, the opposition leader, ended his attacks on Labour's economic policies and vowed that American-style partisan strife would not catch on across the pond.

China (3)

Chinese Premier Wen Jiabao says he's very "concerned" about the U.S. crisis and that China should "make a foothold in expanding domestic demand." Since China's economy relies so much on exports, its growth rate could take a hit if demand from U.S. consumers slows. Not to mention the sizeable stakes its sovereign wealth fund has in Blackstone, the $119 billion private equity fund, and (former) investment bank Morgan Stanley. So, there's one reason why the Chinese government may be very interested in a bailout of U.S. financial firms.

All of these countries are eagerly waiting to see if the proposed U.S. bailout will pass the House this week. Whether the U.S. financial juggernaut can stage a comeback and lend some degree of stability to markets will have a huge impact on how countries around the world proceed.

United States Department of the Treasury

Welcome to the Bad Credit Hotel. You might, at first, be spooked by the Halloween-ish music that greets you like a haunted house -- with an ominous voice-over reading "Don't let your credit put you in a bad place." Or by the hotel receptionist who greets you and asks, "You look lost... come to solve the great mystery of credit?"

But here's the real scary part that I forgot to mention: The Bad Credit Hotel is brought to you by the U.S. Department of the Treasury. Really.

Just as the financial crisis was spinning out of control last week, the Treasury announced a joint media campaign geared at educating younger Americans about how to manage their credit. The online Bad Credit Hotel game is part of the campaign. Click on the clock to learn that creditors cannot call you before 8am or after 9pm. Click on a library book and the receptionist will suggest you begin studying "history--credit history that is."

Ok good--this campaign is geared at preventing another credit crisis. The skeptic in me, however, sees a bit of irony in the Treasury's teachings on debunking the "mystery" of credit. Mystery is about the only thing that looks certain in this financial crisis. Meanwhile, the U.S. Treasury is set to become the biggest creditor in history.

Didn't Treasury Secretary Henry Paulson learn on Wall Street that timing is everything? With bailout talks in chaos, and controvery growing over what would be the biggest government injection in history, my favorite scene of the game begins with a "worldly" treasury-dreamed-up character explaining, "I was once young and careless like you, spending my money like a sailor..."

Dear Mr Paulson, not the image of Treasury you want to promote, noble as the intentions may be.

Perhaps the reason Congress is giving Paulson such a hard time these days is that they, too, have checked in to the Bad Credit Hotel, heeding this next character's advice: "It's hard to find your way when things are at their darkest... don't let the smoke get in your eyes."