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Trading Lessons

International Trade Sinks with the Baltic Dry Index

Economics / Global Economy Mar 09, 2016 - 01:14 PM GMT

By: BATR

Economics

Economists and professional investors follow the Baltic Dry Index because it is a leading indicator on the forecast for international trade. A week ago this gauge hit an all time low. Since then a small upturn has moved the index upward slightly. Hellenic Shipping News observes in Baltic Dry Index climbs to 349, up 7.

“Baltic Dry Index is compiled by the London-based Baltic Exchange and covers prices for transported cargo such as coal, grain and iron ore. The index is based on a daily survey of agents all over the world. Baltic Dry hit a temporary peak on May 20, 2008, when the index hit 11,793. The lowest level ever reached was on Wednesday the 10th of February 2016, when the index dropped to 290 points.”


Some financial advisors believe the bottom has taken place. Even if shipping starts to return to levels that keeps the industry profitable, the prospects for a positive trading balance have no prospects to enrich our country.

Read the government’s own Bureau of Economic Analysis just released on March 4, 2016.

“The Department of Commerce, announced today that the goods and services deficit was $45.7 billion in January, up $1.0 billion from $44.7 billion in December, revised.  January exports were $176.5 billion, $3.8 billion less than December exports. January imports were $222.1 billion, $2.8 billion less than December imports.

The January increase in the goods and services deficit reflected an increase in the goods deficit of $1.1 billion to $63.7 billion and an increase in the services surplus of $0.1 billion to $18.0 billion.

Year-over-year, the goods and services deficit increased $2.1 billion, or 4.8 percent, from January 2015. Exports decreased $12.5 billion or 6.6 percent. Imports decreased $10.5 billion or 4.5 percent.”

Now these figures have become routine, but the apologists for the “Free Trade” rip-off have another obstacle that complicates their false promises of beneficial trade practices. China is experiencing a deep contraction in domestic indices activity.  Reuters’ account that China Feb official factory PMI seen shrinking for 7th month, documents that the market for U.S. exports to Red China is collapsing. The net result is obvious.

The Wall Street Journal reports on some ominous news in At U.S. Ports, Exports Are Coming Up Empty. “Major gateways say more ocean containers are shipping out empty, a sign of weak demand in troubled global markets and the tough sell American exporters face abroad.”

This trend has been building for a long time. Zero Hedge publishes an important article, A Third Of All Containers Shipped From Long Beach Port Are Empty, that illustrates the consequences of this one way street of wealth transfer.

“In short: only an economist, either a tenured one or one employed by CNBC, is unable to see that the world is sinking into a global trade recession, with a economic one soon to follow.

Net trade feeds directly into GDP, so the next time an idiot tells you that there are no direct linkages or contagion choke points between China and the US, feel free to take them to the Long Beach and show them the thousands of empty boxes whose contents one can label simply as "recession".

The reality of this sacred globalist tenant of “interdependence” is that the United States is financing and keeping afloat the cracking Chinese economy. The more America buys from China, the quicker the transfer of money outflow accelerates. Now that US exports are hitting a brick wall, the recession that is ravaging Asia is becoming the next biggest import.

The Baltic Dry Index is a hard standard of measurement to ignore. All the double talk that the financial press can muster will not alter the barren container ships riding high in the water back to pick up more inventories for sale to a suicidal consumer country.

In addition to the Evergreen Marine and Maersk fleet rumbling at half efficiency, the Epic oil glut sparks super tanker 'traffic jams' at sea.

“It's a "super tanker traffic jam," said Matt Smith, director of commodity research at ClipperData.

Smith first noticed the maritime congestion popping up a month ago off the coast of Singapore. That was alarming because Asia accounts for one-third of global oil demand.

"It was kind of strange to see. The ships didn't have any buyers," he said.

And then ClipperData discovered a similar phenomenon off China and even the Arabian Gulf.

"There just appears to be more oil than can be dealt with. They haven't got anywhere to put it," said Smith.”

This is definitive evidence that a worldwide recession is already dragging down economic activity. Transferring liquid financial instruments electronically is nothing like moving cargo across the seas. Trade depends upon a market that has demand for products.

It would be folly to believe that reciprocity is not required to maintain an international trading system. This criterion has not been present for many decades. The slowdown in commercial activity between nations offers an opportunity to correct the imbalance that the globalists have forced upon trading practices.

The unmistakable response is to re-industrialize our own domestic capacity. If foreign countries are wallowing in their own domestic economic quagmire, why should America continue buying their wears and keep propping up their balance sheets?

America was once the greatest maritime trading nation. Today, our ports are mere foreign depositories. Off loading has replaced export shipping. What is so difficult to understand?

With the collapse of the Baltic Dry Index, an intelligent and prudent country would reverse course and steer a chart that casts off the odious trade agreements that have systemically dismantled our domestic capacity and has destroyed our independent economic nation.

This point alone, explains the fear within the globalist community that is reflected in the most disgusting assault on the Trump movement in the 2016 election campaign. Cries to devalue the U.S. Dollar even more is no resolution. Such measures only play into the hands of the betrayers of a viable American economy.

James Hall

Source: http://www.batr.org/negotium/030916.html

Discuss or comment about this essay on the BATR Forum

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Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors

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