Daily Digest - Jan 2

Friday, January 2, 2009, 11:29 AM
  • China factories cut output at record pace:
  • Manufacturing Index Hits Lowest Level Since 1980
  • As Recession Deepens, So Does Milk Surplus
  • Average Annual Unemployment Rate - Then and Now (Chart)
  • Unemployment Rate (Shadow Stats Chart)
  • The Year in Markets (Interactive Chart)
  • Selling gold jewelry
  • Russia cuts off gas deliveries to Ukraine
  • Report: Toyota developing solar powered green car 


China factories cut output at record pace: 

CLSA PMIBEIJING (Reuters) - Chinese factories slashed output and workers at a record pace in December and manufacturing activity overall fell for a fifth month as the global financial crisis hit export demand, a survey by brokerage CLSA showed on Friday. 

The figures, which CLSA said showed a sector close to recession, spell further gloom ahead for the Chinese economy and highlight the urgency with which the government is trying to cushion the country from the effects of the global crisis.

"Chinese manufacturing activity was very weak in December. Output contracted at a record pace, employment fell for the fifth month and work in hand declined," Eric Fishwick, head of economic research at CLSA, said in a statement.

"With five back-to-back PMIs signaling contraction, the manufacturing sector, which accounts for 43 percent of the Chinese economy, is close to technical recession," he said. 

Manufacturing Index Hits Lowest Level Since 1980 

U.S. factory activity fell to a 28-year low in December, according to an industry report released on Friday that showed a more severe contraction in the sector than expected. 

The Institute for Supply Management said its index of national factory activity fell to 32.4 -- the lowest since 1980--from 36.2 in November.

A reading below 50 indicates contraction in the sector.

Economists had expected a reading of 35.5, according to the median of their forecasts in a Reuters poll. Their 69 forecasts ranged from 32.0 to 40.0. 

As Recession Deepens, So Does Milk Surplus 

FOWLER, Calif. - The long economic boom, fueled by easy credit that allowed people to spend money they did not have, led to a huge oversupply of cars, houses and shopping malls, as recent months have made clear. Now, add one more item to the list: an oversupply of cows.

Millions of pounds of government-owned milk powder stored in a warehouse in Fowler, Calif.
And it turns out that shutting down the milk supply is not as easy as closing an automobile assembly line.

Average Annual Unemployment Rate - Then and Now (Chart)

Unemployment Rate (Shadpw Stats Chart)

The Year in Markets (Interactive Chart) 

Edward Charles Ponzi Jr. Looks Ahead 

Target Conservative Portfolio for 2009: 50% Canned Goods / 50% Ammo.

But first a brief detour to one year ago:

I continue to stand by the (very general) ideas that I put forward as themes for 2008. I do not see our current situation as a "downturn" - I see it as a COLLAPSE. A downturn - a normal part of the business cycle - does not usually include a banking-broker/dealer-insurance-derivatives meltdown that requires trillions in support to prevent insolvency of virtually all of major financial institutions.

In the long run, we would be better off without many of those institutions. My buddies on Wall St. used to tell me that they were "creating wealth" - I would correct them and tell that they were "making money" (and participating in massive mal-investment and un-economic activity). The Baily Building and Loan Assoc. (of Bedford Falls) somehow didn't need billions in leveraged speculation, proprietary trading or derivative bets.

There seems to be a lot of talk in AB and elsewhere about this thing called "solutions". Solutions are not my department - predictions are. Any reasonable solution is by definition politically impossible - our political process is about putting out today's fire and leaving the water damage issue to another day.

Since our society cannot go forward carrying every currently existing debt ($50T++) - (this figure does NOT include unfunded liabilities) unwinding unwise credit expansion means insolvency or inflation. There are few true creditors in our society - being a debtor is far more universal. The Federal Government, State Governments, Wall St., Banks, homeowners, consumers, leveraged investors and many other groups would benefit (in a lesser of various evils sense) from the debt reducing power of inflation. 

Inflation is on vacation at the moment - but it is the end game. Fiat money requires at least some net positive inflation and a determined Central Bank can Quant-Ease (plus Gov fiscal) some of our problems away - with many side effects to be sure - but someone has to go over the top rope - and it is going to be savers and not debtors.

At some point we will have what may be called A Recovery - but it will really turn out to be A Reflation and collapse again - just like in the late 1930s. Inflating our way out of trouble may also crash into Peak Oil - creating Check Mate and Lights Out.

Obama recently pointed out how so many "different" economists - were in lockstep about the need for massive "stimulus" - funny how a counter-cyclical idea can seem sensible - but the same people advocate pro-cyclical "stimulus" as we chase one free-lunch after another.

My long-term view is dimmer than my short-term view -- so as we enter this New Year, let's all try and fondly recall how affluent our society once felt - as you will not see that again in your lifetime. 

Selling gold jewelry 


Russia cuts off gas deliveries to Ukraine 

MOSCOW: In the face of mounting economic troubles, Russia cut off deliveries of natural gas to Ukraine on Thursday after Ukraine rejected the Kremlin's demands for a sharp increase in gas prices. 

A similar reduction in supplies to Ukraine in 2006 caused a drop in pressure throughout Europe's integrated natural gas pipeline system and led to shortages in countries as far away as Italy and France.

But with a recessionary drop in demand, ample supplies and assurances from both countries that gas would flow westward without interruption, there were few signs of the near hysteria in Europe that accompanied the 2006 cutoff.

The authorities in Poland and Italy issued soothing statements on Thursday, noting the existence of high reserves and the distant likelihood of an immediate effect on gas supplies.

Even Ukraine, which says it has enough gas in reserve to last through the winter, took Russia's action in stride, underscoring how the political potency of the Kremlin's energy card has plunged along with the price of oil and gas. Its normally fractious political leadership rallied together in the face of the supply cutoff, united in their demand that the Kremlin pay more for the right to transship gas through Ukraine. 

Report: Toyota developing solar powered green car 

OKYO (AP) - Toyota Motor Corp. is secretly developing a vehicle that will be powered solely by solar energy in an effort to turn around its struggling business with a futuristic ecological car, a top business daily reported Thursday. 

The Nikkei newspaper, however, said it will be years before the planned vehicle will be available on the market. Toyota's offices were closed Thursday and officials were not immediately available for comment.

Endorsed Financial Adviser Endorsed Financial Adviser

Looking for a financial adviser who sees the world through a similar lens as we do? Free consultation available.

Learn More »
Read Our New Book "Prosper!"Read Our New Book

Prosper! is a "how to" guide for living well no matter what the future brings.

Learn More »


Related content


Damnthematrix's picture
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: Daily Digest - Jan 2

A solar powered car?  Pigs will fly!

Let's get a few facts straight here....  the average car's roof is ~ 1m^2 to 2m^2.  Don't forget, the bigger the roof, the bigger the car, the morepower it will also need!

The best anyone could expect to harvest, with the world's most efficient (and expensive!) solar cells is 250W.

That is about 2,5 times what a fit person could be expected to output.  Now I ask you, what sort of car could 2.5 persons pedal (how else could humans power a vehicle?) any sort of distance?

If Toyota means powered by external solar cells, like those on the owner's roof,  then the cost has just escalated by at least $15,000, even before you buy the car.

As I said in a post elewhere, traveling 100 miles in a 30MPG car requires the output of all 20 of our panels over a fortnight.......

Now of course, you would have to go ultra efficient, like say 5 times?  a 150MPG (equivalent) car?

THEN, you'd need three days worth of output to travel 100 miles.

OR you could double the number of panels (and the cost) and you'd only need 1.5 days' worth...

What really concerns me when I read articles like this, is that it makes people who do not understand energy and all the complexities of physics complacent, it makes them believe that technology can fix any of our problems.  Just think about the huge number of solar panels such a new Matrix would require, and then think about all the COAL or NUKE fired power stations needed to make the solar panels in the first instance....

And in any case, it would probably still require 50 to 90 barrels of oil to make such a car, depending on its size/weight. 

And where will the debt come from, this time... 

I wonder if people who design cars even look at the entire energy cycle.  Sigh.


Davos's picture
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: Daily Digest - Jan 2

6 miles everyday, less than 42 MPH and no gas.....

Mike, your right, a bike is cheaper. At least it is one step in the right direction, hopefully like computers this technology will grow... 

Davos's picture
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: Daily Digest - Jan 2

I'll likey post this tomorrow, I'm about 2 minutes into it now, the book was a good read... 

SamLinder's picture
Status: Diamond Member (Offline)
Joined: Jul 10 2008
Posts: 1499
Re: Daily Digest - Jan 2

Now that's gotta be the most worrisome thing I've seen lately. Going off the grid (nod to damnthematrix) isn't going to cure our national problem one iota!

[Edit added at 1819]


That's got to be one of the best things you have posted lately. While not as comprehensive as the CC, it did an outstanding job of presenting harsh reality in only 30 mintues in a way that is easily understood by the average person.



tomwil's picture
Status: Member (Offline)
Joined: Aug 31 2008
Posts: 13
Re: Daily Digest - Jan 2

Holy cow Davos!


Deficit as a percentage of GDP huh?


So, is our GDP projected to increase or decrease in the coming years (a graphic of this would be great, please)?




Thanks much



RubberRims's picture
Status: Silver Member (Offline)
Joined: Nov 22 2008
Posts: 145
Re: Daily Digest - Jan 2

Last year the average family's annual gas bill shot up by nearly 50 per cent to £834 after the big six gas suppliers blamed sky-high wholesale gas prices.

By 2015, the UK is expected to import up to 80 per cent of its gas supplies compared with about 40 per cent now.

The UK was a net exporter of gas as recently as 2004.

The UK has 16 days at best of Gas reserves "The UK is absolutely not prepared for a massive supply disruption."

Source: Department of Energy and Climate Change

Davos's picture
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: Daily Digest - Jan 2

Hello TomWill:

I don't have a chart, if I come across one I will post it.

GDP, to me, is an Enron book. Chris's video on Fuzzy Math went over the calculation of GDP, and it was, I recall, circa 2003. GDP was cooked by 40%, I haven't a clue as to what the "cook factor" was in 2008, I could guess it is cooked by 40%.

The way I look at GDP is accordingly:


  • 14.3 trillion is cooked with imputations and a totally bogus deflation figure, it is probably 40% over  and my estimate is that in reality it is at 8 trillion
  • Consumer spending accounted for 60-70% of GDP
  • I don't have the number neatly filed away but MOST of that consumer spending was swiped on credit cards and or tapped equity on a HELOC
  • So to answer your question on GDP falling - no doubt
  • Govt spending will help but by how much i don't know
The questions I ask myself is, "Is the USA as broke as Enron was in its last days?"
  • If our earnings [GDP] are really around 8 trillion less 2.3 trillion borrowed monies = 5.7 trillion actual
  • 5.7 trillion earnings compared to 70 trillion debt  
  • On the Cable News stations you hear the talking heads spouting off about our GDP to debt being good
  • They say we owe less than what we earn, 
  • Our elected officials remind us of this constantly, of course they don't mention that GDP is as baked as Enron's books 
  • And they forgetfully, or more likely unkowingly, mention that we have about 7 times the amount of debt hidden off balance sheet
  • I have heard them spout off that our debt is just 60% of what we make in a year
  • In reality our debt is probably 1250% more than we make in a year
  • To me that equates to a family making $30,000.00 living in a $375,000.00 house and having a 100% mortgage
  • Our debt to equity ratio is like 13.2
  • Enron owed 200 billion and had assetts of 12 billion
  • Enrons debt to equity based on that number was 16
  • We produce NODDA
  • Ben can counterfiet money to help 
  • As he does our dollar will likely be like the seashells I mentioned in
  • Worse the stimulous package these idiot economist are dreaming up use oil, and lots of it
  • One mile of road uses something like 5,500 barrels of liquied asphalt, I think we get about 1.3 gallons of liquied asphalt from every barrel of oil we refine
  • I think this stimulous will be a s"shoot yourself in the foot" stimilous


mainecooncat's picture
Status: Gold Member (Offline)
Joined: Sep 7 2008
Posts: 488
Re: Daily Digest - Jan 2

Nice breakdown, Davos!

Davos's picture
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: Daily Digest - Jan 2

Thanks MaineCoonCat:

Not technically close/perfect I know, and there are probably 9 ways to Sunday to do it with respect to annual deficits....but it is something. Take care 

joemanc's picture
Status: Martenson Brigade Member (Offline)
Joined: Aug 16 2008
Posts: 834
Re: Daily Digest - Jan 2

I'm not an engineer, but a 2,000+ lb. car getting 25-30 mpg and moving a 150lb person doesn't seem efficient to me. Maybe the solution is to build super-light weight cars, thereby allowing the solar panels to work more efficiently. I know a concern would be lighter cars would get destroyed in an accident. If bulletproof vests can stop a bullet, then I'm sure there must be a way to design super light-weight cars to absorb crash impacts.

amitkeerti's picture
Status: Member (Offline)
Joined: Dec 19 2008
Posts: 3
Re: Daily Digest - Jan 2

Corn Ethenol and Cellulosac ethenol are a big scam

Read the below article about the current state of ethenol and in what direction Obama is leading US: 


The.Techno.Luddite's picture
Status: Bronze Member (Offline)
Joined: Nov 26 2008
Posts: 34
Unemployment figures

Looking at those unemployment numbers, the comparisons between the Great Depression and today, with projections:  first I was struck by the fact that it looks like it took a couple of years for unemployment to get really high. Then I immediately remembered:  "oh, but EVERYTHING moves much faster now. And its much more interconnected, feedback loops tend to amplify exponentially"

Its going to be an exciting ride I suspect.

EndGamePlayer's picture
Status: Platinum Member (Offline)
Joined: Sep 2 2008
Posts: 546
Re: Solar Powered Car Comment

Hi Mike -

We managed to run our e-tractor on 3 -15watt solar last summer. It couldn't do any work (no plowing, tilling or mowing) - but it could be driven back to the charging station just on panel power. The panels looked like a sun shade.

We wanted to expand that use to a few panels on bikes (maybe a 3 or 4 wheeler) and again, it would like a sun shade. The e-tractor weights about 350LBs, plus rider & 4 batteries. A bike system would would weight 1 deep cycle battery (67LBs) plus rider. The panels charged the batteries when not being used, and aso act like a power regulator. . . .and when no sun or battery power - pedel power!

The one thing we did notice a few years ago when using a gas powered 10 speed was the tires aren't built for going 200 - 300 miles so we're switching all bike tires to airless.

Live in Peace-

Damnthematrix's picture
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: Solar Powered Car Comment
EndGamePlayer wrote:

A bike system would would weight 1 deep cycle battery (67LBs) plus rider. The panels charged the batteries when not being used, and aso act like a power regulator. . . .and when no sun or battery power - pedel power!

Hi again,

When I was still living in the big smoke, I took up cycling with a vengeance, aged about 46 or 47....  At first it was tough, a sore arse being the predominant problem!  But I eventually got much fitter than I ever expected, even doing 60km (35 miles) Sunday rides for the fun of it.

A friend of mine (and his girlfriend too actually) bought electric assisted bicycles.  There was no way either of them could keep up with me on my Carbon Fibre racer, even uphill!  Now imagine if I'd been twenty years younger....

The great advantage of a bicycle is that it's LIGHT.  Quadruping a bike's weight is totally counterproductive, and post TSHTF, you won't be able to buy batteries anyhow.

Get fit.  Practice makes perfect.  Now that I don't really need to go anywhere, I don't ride my bike as much as I used to, but I can still get on it and ride the 8km to the nearest town in twenty minutes.  Were I still as fit as I used to be, I doubt it would take me 15 minutes.


tblack01's picture
Status: Member (Offline)
Joined: Jan 4 2009
Posts: 4
Re: Daily Digest - Jan 2

My first posting, but now a devoted reader.

Although not a solution ultimately, a small, more efficient car might be useful to slow down the inevitable depletion of oil.

attached is a link to such a car that was shown on TV in Australia. 

with the US government providing assistance to their Auto manufacturers, maybe they should mass produce this product; so if you know who to forward this link onto, please do so.  (I have no financial interest in it, only an interest in survival :)  - if you go to this link, you can see the one minute video.  Below is the written summary of the story.


The University of South Australia's lovable electric car is named
TREV which stands for “Two-seater Renewable Energy Vehicle.” TREV uses
less than a fifth of the energy of a conventional car.

Our modern cities developed on the promise of cheap oil when climate
change was not on the radar. Now, the suburban dream is turning out to
be an environmental nightmare. So how will we turn this around?

TREV is the ideal way to get around town. Staff and students at the
University of South Australia designed and built Trev. Its features

  • two comfortable seats, since more than 90% of urban trips have only one or two people in the car;
  • enough luggage space for at least two overnight bags;
  • 300 kg mass-because using a 2.5 tonne vehicle for commuting is ridiculous;
  • energy-efficient tyres, brakes and suspension;
  • a clean, quiet and efficient electric drive system;
  • compliance with road safety and worthiness regulations;
  • good performance, with a top speed of 120 km/h; and
  • Design range of 150 km of city driving before the car must be recharged.

Most importantly, it uses less than 1/5 of the energy required by a
conventional car, and can be recharged using electricity from clean,
renewable sources such as solar and wind.

Email: [email protected]


Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments