-- Posted Friday, 20 March 2009 | | Source: GoldSeek.com
Analysis of News-www.analysis-news.com
Of Interest to Investors, Survivalists and Others Concerned About Their
Economic and Financial Futures
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With a focus on the Plutocrats, Goldsmiths, Super-Rich Insiders, and their Allies and
what they are conspiratorially doing to manipulate the financial markets, make more
profits, rip us off and install a world government under their control
By R. D. Bradshaw
This Goldsmiths will look at the work of the financial market manipulators to crash the global economy in order to achieve various aims as discussed in previous Goldsmiths. One of the things that is happening is that international trade/commerce is grossly down; which in turn is creating problems in many nations around the world. In some quarters, there are cries for protectionism to try to save the economies in certain countries.
Thus, the question now is it possible that protectionism is having an impact on global trade and commercialism? To see how bad the problem is, it would be well to take a look at some data on world shipping.
The Baltic Dry Index
On Feb 9, 2009, Rense.com carried a story by James Wickstrom on the “BDI Index Points to Worldwide Disaster.” This Wickstrom report appears to be based partly on data from an engineer in Denver who has been following the Baltic Dry index of shipping worldwide. Since the index is not a traded index, Wickstrom claims that no one profits from the index itself.
Per Wickstrom, it is an indicator of how much product is actually out for delivery throughout the world. It cannot be cheated or manipulated because it deals with actual products that are either actively being shipped, or are on docks waiting to be shipped as Freight On Board (FOB). In June, 2008 the BDI stood at a reasonably healthy 11,600. As of now (in Jan 2009), the BDI has plummeted to 791. That's about a 94% drop in goods actually being shipped worldwide.
If we use the Baltic Dry Index (BDI) as a guide for the next 12 months of product delivery and food availability in the stores we shop in then the BDI says shelves will be virtually empty of almost every product we use each and every day. If the BDI is wrong it will be an historic first. The BDI is used by bankers, financial experts, brokers, traders and everyone in high-end finance to assess the global financial condition and the availability of products worldwide.
The BDI has dropped 94% in a short few weeks which means raw materials, grains, ores, steel, iron, cement and all imported products for food manufacturing and product manufacturing even though we actually do very little of that here in the US. We do make bread and other products that require grains, like cereals. We import clothing, gasoline, various fuels and, well, just about everything these days and the BDI says global shipping has shut down. Nothing is moving. Because this spells disaster for a country that produces little and imports everything Wickstrom says that he has been intently blogging about the subject…
This portends unprecedented disaster around the world, especially as it relates to food. Products are simply not being shipped. They aren't being shipped because there aren't any orders for them. This will translate into massive, unprecedented unemployment worldwide and, as things get worse, massive food shortages. Wickstrom suggests that we stock up on dry foods like 50 lb bags of rice, 50 lb bags of oatmeal, beans, powdered milk, canned foods, canned vegetables and such to assure your family will have enough to eat when the world economy totally collapses.
Wickstrom adds that if you do not have food stored up for your family, you will starve to death. If you do not own guns and ammunition, any food you do have will be stolen by roving bands of savages who are trying not to starve to death. The social breakdown that is coming is unparalleled in modern history. We are going to suffer on an order of magnitude greater than folks suffered during the Great Depression. The report urges us to prepare because there may be only a few months left before it all goes to pot.
In the way of some supplemental information, a reader in South Africa sent me the Wikipedia explanation of the index. This source said: “The Baltic Dry Index (BDI) is a number issued daily by the London-based Baltic Exchange. The index provides an assessment of the price of moving the major raw materials by sea. Taking in 26 shipping routes measured on a time charter and voyage basis, the index covers Handymax, Panamax, and Capesize dry bulk carriers carrying a range of commodities including coal, iron ore and grain.
“Every working day, the Baltic canvasses brokers around the world and asks how much it would cost to book various cargoes of raw materials on various routes (e.g. 100,000 tons of iron ore from San Francisco to Hong Kong, or 1,000,000 metric tons of rice from Bangkok to Tokyo). The index is made up of an average of the Baltic Supramax, Panamax, and Capesize indices. These indices are based on professional assessments made by a panel of international shipbroking companies. The BDI factors in the four different sizes of oceangoing dry bulk transport vessels.
“Most directly, the index measures the demand for shipping capacity versus the supply of dry bulk carriers. The demand for shipping varies with the amount of cargo that is being traded or moved in various markets (supply and demand).
“The supply of cargo ships is generally both tight and inelastic — it takes two years to build a new ship, and ships are too expensive to take out of circulation the way airlines park unneeded jets in the California desert. So marginal increases in demand can push the index higher quickly, and marginal demand decreases can cause the index to fall rapidly. e.g. "if you have 100 ships competing for 99 cargoes, rates go down, whereas if you've 99 ships competing for 100 cargoes, rates go up. in other words, small fleet changes and logistical matters can crash rates... The index indirectly measures global supply and demand for the commodities shipped aboard dry bulk carriers…
“Because dry bulk primarily consists of materials that function as raw material inputs to the production of intermediate or finished goods, such as concrete, electricity, steel, and food, the index is also seen as an efficient economic indicator of future economic growth and production. The BDI is termed a leading economic indicator because it predicts future economic activity.
“Because it provides ‘an assessment of the price of moving the major raw materials by sea,’ according to The Baltic, ‘... it provides both a rare window into the highly opaque and diffuse shipping market and an accurate barometer of the volume of global trade -- devoid of political and other agenda concerns.’
“…It is in the interest of The Baltic Index to claim it is ‘devoid of political and other agenda concerns’ but anything can be gamed or speculated.
“On 20 May 2008 the index reached its record high level since its introduction in 1985, reaching 11,793 points. Half a year later, on 5 December 2008, the index had dropped by 94%, to 663 points, the lowest since 1986, though by 4 February 2009 it had recovered a little lost ground, back to 1,316. These low rates move dangerously close to the combined operating costs of vessels, fuel, and crews.”
China Container Shipments Stalled
Rense.com of Mar 4, 20098 had a related follow-up story on “China Container Shipments to North America Stalled.” This report seems to have been based on data from the Journal of Commerce Online.” It specifically addressed shipping data from three Chinese ports and one Filipino port to ports in Mexico for the period 4/2/09-3/3/09. During this one month, the ports in China and the Philippines had exactly zero exports to North America.
As the story noted, “Container volumes at most Chinese ports will grow at single digits rates this year, and may actually decline at some.” ‘2009 will be the most difficult year in a generation,’ said Dr. Fu Yuning, chairman and managing director of China Merchant Holdings (International), whose terminals handle 34 percent of China's total container volumes.
“He said that after several months of no growth in the throughput at China's terminals there was an increase in exports of loaded containers at the end of February as manufacturing started to pick up. Dr. Fu attributed the increase in exports to the drawing down of inventories in China's main export markets in Europe and the U.S. On the other hand, Chinese container manufacturers have not received any new orders since last year. ‘All our ports are jammed with empty export containers,’ he said.”
The Bottom Line
The essence of the above stories is that international shipping—at least from Asia to North America—has declined rapidly in the last 18 months. In fact, the Wickstrom report on the Baltic index is signaling an imminent disaster. The indicated drop in world shipping could be profoundly significant in the coming days.
For a country like the United States, which is utterly dependant on foreign imports for survival, the Baltic Dry Index offers bad news. Not only do these figures spell trouble for most consumer goods, they are even spelling trouble for American food items. Huge amounts of food (at least 28% or more) for American tables are coming from foreign nations.
For example, many fresh fruits to the US come from Chile (often by air shipments). As I use olive oil, it must be noted that most if not all olive oil sold in the US comes from Europe (Spain or Italy). There are also the old regulars—like cocoa, coffee and bananas.
What will happen if olive oil, coffee, cocoa and fresh fruits start vanishing from grocer’s shelves? I am not aware of any present problems in these items but if international trade and commerce is in a stall, there could be any number of products vanishing from the US markets.
The last item worth noting is the question about protectionism. Already numerous media reports are surfacing that protectionism is on the rise. While much of this so far has been talk, smoke and mirrors, it must be allowed that some of it could materialize. I personally doubt that protectionism will arise in the short term as long as the dollar has acceptance.
But the day the dollar starts fading, protectionism will become an issue and foreign goods (including food) will begin to vanish from US markets. As a minimum, the many countries which have been accepting paper IOUs from the US for their goods will one day decide that US IOUs are not worth anything. At that time, they will simply quit exporting their goods worth something to the US in exchange for paper promises not worth anything.
The Gold and Silver Fallout
This whole theme of a slowdown or fall in international trade and commerce will definitely have an impact on gold and silver. The simple reason is that any decrease in use and reliance on currencies (as would happen with a fall in international trade) will open the door for an obvious increase in reliance upon gold and silver as more stable and solid alternatives. This would certainly happen at the national/state levels; and I would submit that even individual people will also have a greater respect for precious metals.
If there should be an appreciable protectionism among nations, we can bank on it that some nations will start looking for ways to increase their supply of gold at the national level. While we may not have much presently in the way of protectionism, it seems prudent to leave the door open for some to eventually surface. In any case, gold should be helped in the coming days.
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-- Posted Friday, 20 March 2009 | Digg This Article
| Source: GoldSeek.com
