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Comment by chollida1 | Hacker News Reader

I wouldn't worry too much about this. The Baltic Dry Index hasn't really been a usable indicator for many years now.

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...

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That is not the consensus. The consensus is a massive decline in commodity prices (oil, metals, etc) and a decline in demand for exportable finished goods is crushing global trade. Indicators are everywhere:

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 is not the consensus.

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!

The BDI's indication is supported by the decline in rail traffic, the decline in imports/exports in/out of China, and corresponding declines for the BRIC nations. Its supported by the recent (and growing) closures of mines and mills globally. From Janet Yellen, Michael Pettis, Zhou Xiaochaun... all acknowledge this decline. You're in a very, very small minority.

What's your take on the Fed raising rates next month? I've seen a lot of consensus that rates are going up next month, but I don't see how they can with various economic indicators showing that the global economy isn't on solid footing.

Perhaps we'll be stuck with ZIRP for a bit longer :/

I'm starting to wonder if "a bit longer" means "forever." There seems to be a real lack of global growth engines.

If you want to chat over coffee about it, I have a long thesis that agrees with this. Global growth is, for lack of a better way to put it, over.

Central planning interest rates will probably never be over 3-4% again (and that's a bullish outlook).

Totally agree for four reasons:

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.

We're in violent agreement!

> Central planning interest rates will probably never be over 3-4% again

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.

Nothing makes them irrelevant like expanding radioactive deserts, huge clouds of fallout, and festering zones of bacterial contamination.

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.

> The irony is there's a lot that could be done.

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.

[1] https://www.youtube.com/watch?v=iJCcoF5K0SM#t=1160

Thanks for this video!

Question ; Considering the projected growth in world population and the huge amount of poor people in the world. How can growth be over? Or are you thinking mostly about the west?

Population growth has slowed (or even stopped) in most countries except for a few outliers in Africa:

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).

It appears that the Fed is just in the business of managing perception. As weird as it sounds they want to get the checkmark for saying they raised the rate (e.g. 25 basis points) while at the same time sending a clear message that any other move upward will be a very slow process. I'm not sure you can have it both ways forever.

>Perhaps we'll be stuck with ZIRP for a bit longer :/

Given Japan's experience we'll probably have it for at least another decade possibly more.

The Fed is probably deciding primarily on domestic indicators.

There's a big difference between Fed governor's acknowledging something, as they often do (see: biotech valuations, startup valuations), and the Fed governor saying it's something the macroeconomy needs to worry about. Can you link me to where they said it was actually a significant risk, above any of the other plethora of risk factors out there?

I agree that it isn't useful anymore, simply because once an index has been shown to 'lead' it will be made part of future models which well then either 'track' or 'lag' but no longer lead. But that does not mean a very low BDI isn't a problem.

Except that even with commodities getting cut in half or losing up to like 3/4 of their value, we are still in a slightly inflation positive environment. What does that tell you about the state of the underlying economy?

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.

Inflation positive? WPI, PPI, CPI and oil prices have all fallen. Where are you seeing any relevant signs of inflation? Remember growth in M2 is offset growth in bank excess reserves sequestered at the Fed.

> Where are you seeing any relevant signs of inflation?

In my grocery bill.

And power, water, rent, property tax etc. Wages are the only bug hold out (in my industry anyway)

N=1

n=2 and anyone else who regularly shops for groceries in North America. Wealthy silicon valley types who post here are almost comically out of touch with the real world sometimes.

You're mistaking changes in growth rates with the growth rates themselves... CPI is, and has been, positive for years now. Remember, you're not a macroeconomist and probably wouldn't be able to debate that last point if I tried to even make sense of it.

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.

A decline in commodity prices increases demand for commodities, so Maersk buys more ships to meet the new demand. Is that possible?

Does the Baltic Dry Index vary inversely with the number of ships presently in the water?

If the over supply of ships impacts it's usefulness is there access to the demand data points to compare?

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