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Baltic Dry Index Implodes, Signals Global Economic Collapse

July 17, 2012 by Brandon Smith
Personal Liberty

In January, I wrote “Baltic Dry Index Signals Renewed Market Collapse,” an analysis of the record-breaking low hit by the Baltic Dry Index and its implications for the global economy; namely, that it signaled a steep decline in true demand around the world and that similar declines in the index’s past have almost always prophesied a crisis event in financial markets.

The mainstream media attempted to write off the implosion of the index as a fluke tied to the “overproductions of cargo ships” instead of a warning sign of deteriorating demand. The past six months have proven that assertion to be entirely false.

Manufacturing has tumbled in the United States, the EU and Asia simultaneously as orders drop back to the dismal levels last seen in 2008-2009 after the credit crisis first took hold, as reports Reuters, the Los Angeles Times, The Manufacturer and The Tokyo Times.

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the question is never 'demand', stupid

it is supply.. they are no longer able to produce things cheaply enough to match the productive output of individual workers.. people's 'demand' never shrinks.. it is capped by supply.. econ 101

Very good article below

It explains in very simple terms the dynamic of the current production slowdown and the over capacity of ships built when they thought things were fine and dandy and did not expected the world economic slowdown.

http://www.guardian.co.uk/business/economics-blog/2012/feb/0...

Ted Kaczynski

Also known as the UNAbomber said the system would collapse. He said it would be because of worl trade and technology. I believe the old unabomber. You all should read the manifesto, its quite good and well written. He bashes both the right and left, of course the right he bashes is known as neocons. The left is always the same.

Look up the UNAbomber manifesto on google.

"But you must remember, my fellow-citizens, that eternal vigilance by the people is the price of liberty, and that you must pay the price if you wish to secure the blessing." - Andrew Jackson

st00pid

Don't you live it when someone with a double digit IQ runs around screming the sky is falling?

Now the BDI refers to costs of shipping. Costs of shipping is a function of supply and demand AND of the actual basic costs to ship something. Now, this probably comes as a surprise to the author, but one does not print a cargo container. No... One does a great deal of planning, then lets out contracts. So if such a ship is needed, or is forecast to be needed, then one makes their best guess and says lets build. The average time to build a ship is two years.
That is once construction is started. Figure another year of paperwork before the first piece of metal is cut. In 2007 there was a large backlog, on the order of 3500 ships. So these were in the pipeline as the economies started to implode. Now add on to this that many manufacturers have decided that they want as shorter more reliable delivery chain. Has the Mr. Smith ever heard of Toyota, or the Earthquake in Japan? Also, high tech complex products can be made more reliabley and cheaply in the states than in China. Also, larger ships can carry more cargo for less expense. Also the cost of fuel is a bit less not than it was in 2008. And, I suspect, that those whose business it is to manage costs, having triple digit IQ's, probably did some hedging in early 2009, to lock in fuel prices at under 50.00 a barrel.

Put all that together, and obviously the cost to ship would have gone down and stayed down. Anybody actually looking at the evidence would be able to see this. Well, if they had triple digit IQ's that is :-)

What a load of cr....p

Anyone who believes this BS from the person who thinks they have a triple digit IQ would have to have a double digit IQ.

Nothing, I repeat, nothing this poster says has any relevance to why the Baltic Dry Index chart looks the way it does. Gannett's chart looks the same way. You going to throw out a bunch of BS excuses for their chart as well.

The only thing stOOpid around here was your post. I almost felt like I was reading MSM news site propaganda when I read this. But who knows, perhaps that's where you got it, as I'm sure their saying the same type things.

Of course not a word out of you about how the bailout money was used to manipulate these charts which is the only reason these charts don't look worse than they actually are.

fireant's picture

Thank you. There are plenty of bad looking indicators

out there, but BDIY is not currently one of them.

Undo what Wilson did

You want the truth.

You can't handle the truth. But I'll tell you any way since most of you won't believe it. The fall in the Baltic Dry Index is directly related to RON PAUL. Just as the collapse in the economy in 2008 was directly related to RON PAUL, the other excuses given back then were only the results of the collapse brought on by Ron Paul.

You can clearly see this in the 5 year chart. When the people find their hopes dashed in regards to Ron Paul, this chart, along with other investment charts, go down because those Ron Paul supporters reacted by changing their spending habits.

You can see this same trend in many charts like Gannett, Sony, Viacom, etc., when Ron Paul's chances of winning were diminished in any way the people looked to take it out on those they could, so they cancelled their Gannett newspaper subscriptions, their TV cable, and in doing so put these companies and these charts into the red where the companies couldn't hide these losses from investors, thus is the reason you had the government and Federal Reserve bailouts of these same companies and charts.

THAT IS THE POWER this movement has which media will NEVER TELL YOU.

And if Ron Paul doesn't get the nomination this August, your going to see another HUGE drop on all these charts like the ones you saw in 2008 only it will be a little different for several reasons. It would take me pages to explain those reasons and this future drop but to put it simply it will be the big collapse most of you have imagined about.

It only takes 10 to 15% of the people protesting to put a company in the red when they were in the black, this is what Ron Paul's supporters did in 2008 and will do again in 2012 if he isn't elected President, the housing bubble bursting and all the other excuses were only the results of the liberty movement candidate's bubble bursting.

That's the truth of the matter. And there is plenty of proof out there to back it up.

Make a chart showing the

Make a chart showing the highlights and lows of Paul compared to the economy.

To climb the mountain, you must believe you can.

Gross Says U.S. Nearing

Gross Says U.S. Nearing Recession as Goldman Sachs Cuts Forecast

http://finance.yahoo.com/news/gross-says-u-nearing-recession...

Well people still have to eat

Probably a good thing the boat loads of plastic bannanas from China slow down. Hopefully the days of $400 ipods made in China for $5 are over. We badly need deflation in things like health care, education, energy..

The bad news is that central banks will continue stealing our money to prop up useless pos like Goldman Sachs

I don't see a little bitty piece of gold for 1600 bucks as a safe haven. I'd look at hard assets like real estate in areas where it's selling for 20 cents on the dollar

Government is supposed to protect our freedom, our property, our privacy, not invade it. Ron Paul 2007

Republicae's picture

Yes, but let's put that in

Yes, but let's put that in perspective, in February 2008, the Baltic Dry Index was over 11,000, today it is at somewhere around 1052.90. No matter how you look at it, that is a little more than a substantial drop. The fact that the index has been ticking up since February of this year is relatively meaningless in the overall picture of just what has taken place.

Additionally, if you look at the chart for the last few months, it dropped from a meager high of 2145 back in October 2011 down to its low in February of 2012 around the 600 mark. So, yes, it is moving upward, if you can call it that. Now, I don't give too much credence in the signaling of the BDI until it sinks below 900, when it gets that low then things begin to happen.

http://militantjeffersonian.com

"We are not a nation, but a union, a confederacy of equal and sovereign States" John C. Calhoun

fireant's picture

The context of this post though,

is that the last six months prove ship overbuilding had nothing to do with the '08 plunge. To make such an assertion, the index would have to have gone down the last six months (which still would not prove that assertion anyway).
For the record, I agree the six months is near meaningless. The best that can be said is we've been flatlining since the '08 low, which predicts neither a coming crash nor a re-bound in global manufacturing.

Undo what Wilson did

Republicae's picture

I agree, as I said, I rarely

I agree, as I said, I rarely pay attention to the BDI unless it begins to move below the 900 mark, at that point there is a definite dislocation occurring.

http://militantjeffersonian.com

"We are not a nation, but a union, a confederacy of equal and sovereign States" John C. Calhoun

fireant's picture

Since this discussion a month ago, Baltic Dry Index has

nose dived down to 720. The low of late 2008 was around 660.
Since the overbuilding of ships have long since been factored in, one can only assume the current down trend is due to lack of economic activity.

Undo what Wilson did

I recommend the book bird

I recommend the book bird watching in lion country.

fireant's picture

And your point is..

?

Undo what Wilson did

Don't be fooled by short term

Don't be fooled by short term "trends"

fireant's picture

Who is being fooled?

Only someone who did not read my comments would make such an assumption. I merely point out the last six months do not support the authors conclusion. The article is a sham. It even disregards the obvious ovebuild of ships as others here have pointed out. I mean, good grief, there's plenty of evidence out there to suggest things are going to sh!t; there's no need to make stuff up.

Undo what Wilson did

You're right that there is no

You're right that there is no need to make things up but my recomendation is never pay attention to the very short term, always look for the long term when looking at charts.

Checkout the 5 year chart

Check out the 5 year chart... you'll see what kind of uptrend we're in. :)

fireant's picture

Did you read the article? It makes the claim the last 6 months..

prove something about it's lows, and it does no such thing; it is in an uptrend the last 6 months, so the article loses cred imo, mattering not how we got to those lows.
It is currently moving up, which would suggest there may be a turn-a-round in global mfg coming within the next 6 months or a year. It is also possible we have yet to fully account for the predictive plunge in '08, which would make the last 6 months a head fake.

Undo what Wilson did

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