Baltic Dry Index Falls Below 500 for First Time
gcaptain.com
gcaptain.com
Originally it was a brilliant insight. Most numbers can be fudged, but it was super expensive to have ships sitting around empty so the index was hard to game.
What made it even more useful was that it is one of the very few leading indicators of the global macro economy. Most indicators that work are lagging, which means they tell you that something has already happened.
Since hte index measures both demand for shipping and supply it can be pushed down by either. The general consensus is that the current lows is actually due to over supply by the shipping giants like maersk.
More reading:
http://www.economist.com/blogs/economist-explains/2015/03/ec...
http://www.forbes.com/sites/timworstall/2015/02/05/why-you-s...
Rail Traffic Data: https://www.aar.org/Pages/Freight-Rail-Traffic-Data.aspx
US Capacity Utilization: https://research.stlouisfed.org/fred2/series/TCU/
US Exports: https://research.stlouisfed.org/fred2/series/IQ
US Industrial Production: http://www.tradingeconomics.com/united-states/industrial-pro...
WPI, PPI, CPI and oil prices have all fallen significantly.
I don't want to get political but a deflationary spiral is something governments globally should be working to correct, yet priorities seem to be elsewhere.
That's fair as far as I guess there is no consensus. You posted alot of links that don't really point to any definitive conclusion.
Look at your data. It doesn't correlate with the Index in any way. The Index had a very pronounce peak in 2008.
This link > https://research.stlouisfed.org/fred2/series/TCU/
was on a huge downward trend staring in 2007
I agree there is alot of room for interpretation, but I'm very happy to stand behind and put my money behind my assertion that the Baltic Index isn't a useful indicator anymore.
But I do appreciate the opposing view point!
Perhaps we'll be stuck with ZIRP for a bit longer :/
Central planning interest rates will probably never be over 3-4% again (and that's a bullish outlook).
http://data.worldbank.org/indicator/SP.POP.GROW
Also, you're assuming more people = population growth; that's like Snapshat saying they're profitable because they have tons of users, but no revenue. You need a properly functioning economy as well as people to have growth (you need more than that, but that's all I included for simplicity sake).
1. Wealth demography. Wealth is held by older people seeking safety not growth/risk.
2. Capital stagnation. Capital is being stockpiled by central banks and large corporations. The former seeks to rectify structural problems in spending and banking sectors. The latter seeks to avoid tax liability.
3. Small businesses abandoned. Developed nations, the US in particular, have focused resources on the largest institutions and institutions serving the poorest. By comparison small businesses are ignored creating more risk for large institutions, and incrasing the ranks of the poor.
4. Global instability. Declines are almost always preceded by alarming world events causing capital flights that expose imbalances in economies. Yes, the solution is to not have imbalances, but aside from that utopian ideal, restoration of a stable world order opens the door to economic risk taking and then prosperity.
Not until we see a large scale war. Nothing raises interest rates like a bond-funded war campaign. A war would also increase aggregate demand, R&D spend, and decrease the domestic labor force.
It's a sad fact that it takes violence/discomfort to galvanize and restore discipline to a nation and its leaders. Not unlike the disruption of old industries by the new. Except in war, you break bones and bodies whereas in startup land you break laws and customs.
I don't think we want a large scale war. Technology benefited a lot from previous wars - without WWII and the Cold War computing and telecoms would be a few decades behind - but technology has changed the risk/benefit profile to make war unfeasibly destructive.
The irony is there's a lot that could be done. We need clean energy, more support for small businesses of all kinds, desalination, infrastructure replacement, and possibly a hugely increased space program.
But current economic models are fiscally constipated - possibly terminally - and improvements are unlikely until they're replaced.
We should have been doing all that and more. Unfortunately, the only thing that was politically feasible was QE.
> But current economic models are fiscally constipated
Absolutely.
After hearing Mark Blyth's recent "ha ha only serious" summary[1] of both of these points... it's going to be a rough ride.
Given Japan's experience we'll probably have it for at least another decade possibly more.
Furthermore, you're making the classical economic fallacy of reasoning from a price shift. Oftentimes, from experience, commodity shipping volume increases in times of turbulence, as there are more arbitrage opportunities from the more volatile diffs between grades.
In my grocery bill.
edit: Just in case, if you are going to post anything about ShadowStats, or the Fed lying about numbers, there's nothing to even argue. It's hilarious that people think they get to choose their own definitions of inflation, when it's a fairly strictly defined thing. Just because your grocery bill "inflated" ≠ the economy is experiencing inflation.
Does the Baltic Dry Index vary inversely with the number of ships presently in the water?
BDI goes up when bulk shipping capacity is tight. That's interesting, but the reason BDI was an obscure index until the 2008 crisis is that it isn't a good indicator of the health of the world economy.
Except for that one time: The BDI crashed super-hard because nobody could get a letter of credit. It was the canary in the coal mine for the subsequent general seizing-up of credit due to the derivatives-driven crash.
"Every working day, a panel of international shipbrokers submits their view of current freight cost on various routes to the Baltic Exchange. The routes are meant to be representative, i.e. large enough in volume to matter for the overall market."
So three [chaps|chapesses] in London think of a number presumably based on some kind of average volume figure and price.
I'll have to find a list of obscure indices and do some visualisations. Might make Maths lessons a bit more interesting...
Mining and shipping large quantities of coal and iron large distances is just an inherently unsustainable practice.
Economic indicators as well as other fundamental aspects of the economic era may need to be replaced with more up-to-date concepts.
As the Chinese economy picks up and global trade values continue to rise with growing populations, this effect should decrease and you should see shipping prices rise. Compounding this is that smaller shipping companies are being merged into larger ones as the low prices make their business unsustainable.
So you can also expect this index to spike rapidly in the future as consolidation occurs.