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What If The Imploding Baltic Dry Index Does Reflect Global Trade After All

from Zero Hedge:

Earlier today, the Baltic Dry Index hit a new all time low.

This is not new: we have been tracking the collapse of the Baltic Dry – aside for the occasional dead cat bounce – to all time lows, a proxy of global shipping and thus trade, for the past 7 years.

To be sure, for staunch goalseeking Keynesian the collapse in Baltic Dry rates had little to do with actual demand for this services, and everything to do with the alleged supply of drybulk shipping, which was the stated reason for the collapse in costs.

In other words, “trade was fine.”

Well, maybe not as the following chart from Capital Economics shows:

Correlation may not be causation, but it sure is troubling. Which begs the question: as the baltic dry index continues to plumb new record lows, how long until central banks realize that for all their omnipotence and all their attempts to restore growth, inflation and the “wealth effect” they never mastered the only thing worth printing in a globalized world: printing trade?

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3 comments to What If The Imploding Baltic Dry Index Does Reflect Global Trade After All

  • Ed_B

    “To be sure, for staunch goal-seeking Keynesian the collapse in Baltic Dry rates had little to do with actual demand for this services, and everything to do with the alleged supply of drybulk shipping, which was the stated reason for the collapse in costs.”

    No problem. The Keynesians will simply “magic” these goods anywhere they are needed with no ships, trains, or trucks necessary. :-/

  • Christine

    “What If The Imploding Baltic Dry Index Does Reflect Global Trade After All”

    What if it didn’t because… a lot more of the trade has been moving inland between Russia and China, China and India, Russia and Europe and China all over Africa… in Yuan? Baltic Dry is only important for what ocean shipping is concerned, in dollar figures.

    What if… the really big loser was the insular US? What if this is exactly where it is going…?

    • anon

      Well raised point. However, I am not sure there is enough rail in place to move the same tonnage/ unit price. No matter what monetary unit (dollar, euro, yaun) it is still the most cost effective to move bulk cargo by ship, then rail, then truck.

      There is no doubt a concerted effort to trade outside the dollar and in local currency.If you look at the additional evidence (i.e. Glencorp, Tata Steel)the other indicators in commodity prices and production output, the BDI is just the icing on the cake.

      As much as I hate to admit it, continued low oil prices will disrupt the US economy in a big way. The stronger the dollar becomes the less the US will be able to export.I believe we are indeed about to see a big unwind in the markets.(keep in mind the “markets” are totally rigged and not truly reflective of the economy)Which will most likely finish off whats left of the already fractured economy. Thus…commerce by barter? (only after political ramifications of course)

      Then people might wake up, and when they see the light hopefully it will not be a bright flash on the horizon.

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