Shipping rates hit zero as trade sinks Freight rates for containers shipped from Asia to Europe have fallen to zero for the first time since records began, underscoring the dramatic collapse in trade since the world economy buckled in October.

Quick Overview

• (Bloomberg) -- Federal Reserve Chairman Ben Benanke warned that a fiscal stimulus won’t be enough to spur an economic recovery and that the government may need to buy or guarantee banks’ tainted assets.
  

• U.S. exports fell $8.7 billion in November to $142.8 billion while imports fell $25.0 billion to $183.2 billion.
  
  

• China’s exports fell 2.8% -- the most in almost a decade
• According Chinese customs data:
  Imports of iron ore into China rose to 34.53 Mt in December. This marks an increase of 2.0 Mt MoM and up 0.3 Mt YoY. Soyabean imports for 2008 showed an increase of 6.6 Mt YoY. December imports of 3.30 Mt took the annual total to 37.44 Mt.
  

• Canada’s exports fell 6.8% in November while imports fell 4.8%
  Canada’s new home prices fell 0.3% in November.
  

• The ICO raised its guess of the world's 2008-2009 coffee crops from 132.5 to 134.2 million bags, YoY this is up from 116.2. Consumption for 2008 remained unchanged at 128 million bags. For 2009 they anticipate consumption at 132 million bags.
  The ICO said Brazil’s coffee production, which follows a biennial cycle (high output one year followed by low the next), could fall from 46m 60kg bags in 2008-09 to between 36.9m and 38.8m bags this year, a drop of 16 to 20 per cent.
  

• The Florida Department of Citrus said there were 104.9 million gallons of frozen orange juice concentrate in inventory -- up 77% YoY
  

No need for condoms – GE corn can do the job
New research from Austria shows that a commercial strain of Monsanto-made GE corn causes mice to have fewer and weaker babies. What is this doing to human fertility?

The bond bubble has long since burst: investors, ignore this at you peril

The Fed's December minutes reek of fear. The Bernanke team is no longer sure that stimulus will gain traction in time.

The Fed's "Monetary Multiplier" has collapsed, falling below 1. This is unthinkable. We are in a liquidity trap.

So yes, printing money is not as easy as it looks, but to conclude that the Fed cannot bring about inflation is a leap too far.

The hundred years' war
How growing rejectionism, the rise of religion, a new military doctrine and a new cold war keep peace at bay

Merrill Lynch says rich turning to gold bars for safety
"They are so worried they want a portable asset in their house. I never thought I would be getting calls from clients saying they want a box of krugerrands," he said.

Europe's economy contracts at rates not seen since 1930s
Jacques Cailloux, from the Royal Bank of Scotland, said the pace of contraction in Europe is now disturbingly close to levels seen in the Great Depression. The eurozone bloc shrank by 3pc in 1930, 5pc in 1931, and 4pc in 1932.

Quick Overview

• The U.S. Labor Department said that jobless claims were down 24,000 last week to 467,000.
  

• The Bank of England cut rates from 2% to 1.5%, the lowest since 1694.
  

• Chancellor Alistair Darling denies he is planning to "print money" in order to boost the UK economy.
  

• Mexico’s President Felipe Calderon promised nearly $150m to struggling industries in a bid to save hundreds of thousands of jobs.
  
  

• Euro zone business sentiment fell to 67.1 from Novembers 74.9 - the lowest level since records started in 1990.
  
  
• Euro zone GDP fell 0.2% QoQ,
  

• Euro zone unemployment rate rose from 7.7% to 7.8%.
  

• Australia's building approvals fell 12.8% in November.
  

• The Japanese central bank is providing banks with emergency loans ($13bn) in a new bid to stimulate its worsening economy.
  
  

• Brazil cut its corn production estimate by 85 million bushels. Soybean production forecast was lowered by 36.8 million bushels.
  
  

• (WSJ) The No. 1 problem facing US taxpayers? A tax code so complex that Americans spend $193 billion per year just trying to figure out how much they owe.
  
  

• In a report just published, "The Digital Road to Recovery: A Stimulus Plan to Create Jobs, Boost Productivity and Revitalize America," the Information Technology and Innovation Foundation (ITIF) finds that a $30 billion investment in America's digital infrastructure -- broadband networks, health IT, and a smart power grid -- will spur significant job creation in the short run, creating approximately 949,000 U.S. jobs while leading to higher productivity, increased competitiveness, and improved quality of life

'Buy USA' push may see America slip from free trade church
Pascal Lamy, the WTO chief, is so worried he has taken to displaying portraits of Willis C. Hawley and Reed Smoot at his Green Room in Geneva, evoking the arch-villains of the Smoot-Hawley Tariff Act that set off the trade wars of the Great Depression. The Act was forced upon a disgusted President Herbert Hoover in June 1930. This is the pattern in democracies. Lawmakers – with a constituency base – are the first to push for protection.

Quick Overview

• The U.S. budget deficit in 2009 is projected to spike to a record $1.2 trillion, or 8.3% of GDP.
  

• Employer Services’ report that payrolls shrank by 693,000 jobs last month, the most since records began in 2001.
  

• Australia's retail sales rose 0.1% in November
  

• Euro area’s producer prices fell 1.9% MoM, but rose 3.3% YoY.
  

• Russia shut down all gas flows to Europe through Ukraine on Wednesday.
  

• Germany saw its unemployment levels rise to 7.6%.
  

• Intel expects fourth-quarter revenue to fall 23% YoY because of weak demand and inventory reductions by its customers.
  

• The U.S. Department of Energy said:
  Supplies of crude oil rose 6.7 million barrels to 325.4 million barrels
  Supplies of gasoline rose 3.3 million barrels
  Supplies of heating oil fell 900,000 barrels
  Refinery use increased from 82.5% to 84.6%.
  Gasoline demand fell 2.2% YoY
  Distillate demand rose 0.3% YoY.

• According to a report on FarmFutures.com, the continued dry weather in top-producing areas of southern Brazil could mean a drop in corn and soybean production
  

• Madoff and his wife sent at least 16 watches, a jade necklace and a diamond bracelet to family and relatives.
  

From Wall Street to Washington
It's All One Big Lie The first panel to testify included H. David Kotz, the Inspector General of the SEC. Mr. Kotz has the youngish, fresh-scrubbed, optimistic face of someone who hasn’t been exposed to Wall Street for very long. He’s been at the SEC for 13 months. Before that he served as Inspector General at the Peace Corps. (Yes, Peace Corps.) Before that he worked at the U.S. Agency for International Development (USAID). He is a lawyer but apparently has no securities background to untangle the web at the SEC that permitted the largest and most complex securities fraud in the history of the world.

One clear sign of the End Time is when the media starts publishing my opinions on the economy.
wonder what people mean when they say the economy will recover in 2010. The only way that can happen is if another irrational bubble forms thus creating an illusion of wealth similar to our previous illusions. If you take illusions out of the equation, there isn't anything to get "back" to. The wealth was never there in the first place.

US stockmarket returns
Booms and busts Comparisons to the Depression are clear: only in 1931 and 1937 were there similarly abysmal losses

Quick Overview

• (Bloomberg) -- President-elect Barack Obama said he expects to inherit a $1 trillion budget deficit and that similar shortfalls are in store “for years to come”

• U.S. factory orders fell 4.6% in November, twice as much as forecast.

• U.S. pending U.S. home sales fell 4.0% in November, weaker than expected. The National Association of Realtors says this is the lowest level on record.

• The Institute of Supply Managements' index of services rose from 37.3 to 40.6

• An index of services in the U.K. rose from 40.1 to 40.2

• U.K. House prices fell by 15.9% last year.
  

• Inflation in the eurozone fell more than expected to 1.6% in December.

• (FT) The German government’s second fiscal stimulus could reach €50bn ($68bn, £47bn) over 2 years.

• Pakistani troops moving against Taliban guerrillas have intermittently blocked the one supply route through the Kyber Pass from Pakistan into Afghanistan.

• (WSJ) Russian gas supplies to a swathe of Europe were all but cut off as temperatures plummeted across the region, raising the stakes in a pricing dispute between Moscow and Ukraine.

• GM, Toyota and Ford all reported U.S. sales decline of more than 30% for December.

• Oil prices hit $50 a barrel amid escalating violence in the Middle East.

Quick Overview

• U.S. construction spending fell 0.6% MoM and 3.3% YoY.

• The N.Y. Fed said that it has begun buying fixed rate mortgage backed securities, as it previously announced it would do.

• (WSJ) Madoff's firm was examined at least eight times in 16 years by various agencies, which never came close to uncovering his alleged scheme.

• The Purchasing Managers' Index (PMI) of China's manufacturing sector climbed 2.4% MoM to 41.2% in December. A reading above 50% indicates expansion, while one below 50% indicates contraction.

• Construction activity index in the U.K. fell from 31.8 to 29.3 in December.

A special report on the sea
Troubled waters The evidence abounds. The fish that once seemed an inexhaustible source of food are now almost everywhere in decline: 90% of large predatory fish (the big ones such as tuna, swordfish and sharks) have gone, according to some scientists. In estuaries and coastal waters, 85% of the large whales have disappeared, and nearly 60% of the small ones. Many of the smaller fish are also in decline. Indeed, most familiar sea creatures, from albatrosses to walruses, from seals to oysters, have suffered huge losses.

Asia needs to fully wake up to the scale of the West's economic crisis
The defenders of this dead-end strategy are now coming up with astonishing proposals to put off the day of reckoning. Akio Mikuni, head of Japan's credit agency Mikuni, has called for a "Marshall Plan" to bail out America by cancelling $980bn of US Treasury bonds held by the Japanese state.

Quick Overview

• The Feds Yellen on Sunday urged "pulling out all the stops" by implementing a big fiscal stimulus program to turn around a possible long period of economic stagnation in the United States.
  

• The purchasing managers index published by China’s Federation of Logistics and Purchasing rose to 41.2 in December from the record low of 38.8 in November.
  

• The U.S. ISM index of manufacturing fell from 36.2 to 32.4 in December, the lowest level since 1980.
  
  

• Russia has shut off natural gas to Ukraine, saying that the country owes it $600 million for previous sales.
  

• Manufacturing activity in the Euro area fell from 35.6 to 33.9 in December,
  

• GDP in Singapore fell 2.6% YoY.
  

• Bloomberg reported that world’s largest iron ore consumer China may ask global iron ore majors to accept an 82% price cut for iron.
  

• According to SSY’s Australian Coal Port Congestion Index, average delays are now 9.93 days, the highest since June 2008. Congestion at Australia’s coal ports has contributed to the recent upward movement in freight rates.
  

• Japan’s factory output fell 8.1% in November -- the fastest pace in 55 years.

Happy Holidays!

(Updates resume Jan. 5)

Quick Overview

• Bush threw auto makers a $13.4 billion lifeline from the U.S. bank-bailout program.
  

• YoY Canada’s consumer prices rose 2.0% in November.
  

London Banker: “The market has failed, and officialdom is perpetuating that failure
The problem isn’t just money either, but how quickly the money is turned over.

Consumers Get Important New Credit Card Protections While praising the new protections, Consumers Union criticized the 18 month delay before consumers finally get relief.

Quick Overview

• U.S. jobless claims were down 21,000 to 554,000 last week
  

• The Philadelphia Federal Reserve's index of manufacturing improved from -39.3 to -32.9
  
  

• U.S. leading indicators fell 0.4% in November
  

• U.K. retail sales rose 0.3% MoM and 1.5% YoY
  

• (Bloomberg) -- The Bank of Japan cut its benchmark interest rate to 0.1 percent and introduced new ways of pumping money into the banking system to bolster the ailing economy.

• German business confidence (IFO) fell to its lowest level ever in December amid concerns of a prolonged recession.
  

• Canada’s retail sales fell 0.9% in October.
  Canada’s leading indicators fell 0.7% in November.
  

• (Bloomberg) -- General Electric Co.’s debt ratings outlook and those of its GE Capital finance arm were changed to negative from stable by Standard & Poor’s, reflecting concern earnings could deteriorate further than previously thought.
  

• Bush is looking at "orderly" bankruptcy as a way to deal with the U.S. auto industry.

South African central bank gold sales dry up .. Demby also pointed out that demand for gold coins and bullion now exceeded supply by a huge margin as investors were seeking a safe haven from the prospective fallout in the wake of mammoth money supply creation by the United States government.

Quick Overview

• U.K. unemployment rate was 6.0, up from 5.8% MoM.
  

• Construction output in the Euro area rose 0.1% in October, but down 4.0 YoY
• YoY Consumer prices in the Euro area rose 2.1%
  

• Canada wholesale sales fell 1.8% in October
  

• Norway cut its interest rate from 4.75% to 3.00%
  

• OPEC will be cutting oil production by 2.2 million barrels a day as of January 1.
  

• The U.S. Department of Energy said:
  Supplies of crude oil rose 500,000 barrels to 321.3 million barrels.
  Supplies of gasoline rose 1.3 million barrels
  Supplies of heating oil supplies rose 600,000 barrels.
  Refinery use dropped from 87.4% to 84.1% of capacity
  Gasoline demand fell 2.7%
  Distillate demand fell 4.5%.
  

• Russia's central bank allowed the ruble to slide for the second time this week, speeding up the gradual depreciation policy
  
  

• French antitrust authorities ruled that Apple must allow other operators other than France Telecom to sell its iPhone, saying the exclusive deal was unfair for competition.
  

• Morgan Stanley reported a wider-than-expected $2.2 billion quarterly loss.
  

Quick Overview

• The Fed cut the fed funds rate from 1.00% to .125%, and signaled they will keep rates "exceptionally low" for some time amid rapidly waning price pressures.
  


• U.S. housing starts were at a record (since 1959) low annual rate of 625,000 in November, down 18.9% MoM.
  Building permits fell 15.6% MoM.
  


• The U.S. consumer price index fell 1.7% in November rose 1.1% YoY
  


• YoY U.K. consumer prices rose 4.1% in November
  


• Manufacturing and services index in the Euro area fell from 38.9 to 38.3
  


• China’s November steel output fell by 12.4% YoY

Bush Shoe Tosser Signed By The Seattle Mariners SEATTLE, Washington - The Seattle Mariners who in 2008, had the worst record in the American League (61-101) have just signed Muntazer al-Zaidi to a three year, $3 million pitching contract.

Our Updated Take on Gold Prices
The last era of any significant period of deflation was in the 1930s. Although gold was fixed for a long time at $20.67 per ounce, in 1934 a massive devaluation of the U.S. dollar saw its fixed price jump to $35 per ounce. During this period of entrenched deflation, and in spite of the fixed price of the metal, gold proxies saw a dramatic rise in price. The NYSE-listed shares of Homestake Mining Company rose from about $4 to $500 from 1929 to 1935; the company operated for some 120 years until its flagship Homestake mine in Lead, S.D., ran out of economic reserves a few years ago and the company ceased to exist.

Quick Overview

• U.S. industrial production fell 0.6% in November and 5.5% YoY
  

• Japan's Tankan fell from -3 to -24
  

• China's industrial output rose 5.4% YoY
  China’s November iron ore imports rose 6% MoM
  

• The Supreme Court ruled that cigarette companies can be sued by smokers who claim they were deceived by advertisements promoting “light” cigarettes.
  

Madoff and the Global Economy
The big unanswered question, for years, was why this money flow persisted. Why the heck were foreign investors willing to lend the U.S. such large amounts of money on such good terms? Economists and journalists spun out hypothesis after hypothesis (we'll see more below), but there was no agreement on why.