Global Economic Indicators Still Cold

| May 14, 2009

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I honestly don’t blame the administration for talking up the economy over the past few months. I am sure they wanted to see if they could nudge Americans into coming out of the bunkers and buying again. It worked for George Bush after 9-11, maybe they can give it one more go?

Sadly, Sally and Joe Sixpack are tapped out. Any spare money they have is either going to pay off their debt or being salted away, waiting for the other shoe to drop.

While talk in the press as of late has been that some have seen “green shoots” of a nascient recovery, the larger indicators are showing a different story; a story of a prolonged and deepening crash around the world. Consider this story from the New York Times, Cargo Ships Treading Water Off Singapore, Waiting for Work:

One of the largest fleets of ships ever gathered idles here just outside one of the world’s busiest ports, marooned by the receding tide of global trade. There may be tentative signs of economic recovery in spots around the globe, but few here.

So many ships have congregated here — 735, according to AIS Live ship tracking service of Lloyd’s Register-Fairplay in Redhill, Britain — that shipping lines are becoming concerned about near misses and collisions in one of the world’s most congested waterways, the straits that separate Malaysia and Singapore from Indonesia.

The root of the problem lies in an unusually steep slump in global trade, confirmed by trade statistics announced on Tuesday.

The gathering of so many freighters “is extraordinary,” said Christopher Pålsson, a senior consultant at Lloyd’s Register-Fairplay Research, the consulting division of Lloyd’s Register-Fairplay. “We have probably not witnessed anything like this since the early 1980s,” during the last big bust in the global shipping industry.

The global shipping fleet lies rusting at anchor in the Malacca Straights, hoping one day to have cargo to cary. Many of these ships were built in the last 10 years by conglomerates and global funds hoping to cash in on the global trade boom they thought would never stop. Those ships were financed through large banks in Europe and the US. What do you think happens whey they can’t make the payments because there are no work for the ships? Subprime super tankers anyone?

No matter how much anyone tries to talk the economy out of the slump, the fundamentals are still showing the worst is yet to come. As we cored out whole industries and sent them over seas, we lost the ability to manufacture our way out of it. All we produce now is debt and crazy derivatives on debt. The market for them disappeared well over a year ago and won’t likely ever come back.

That other shoe? It’s still waiting to drop.

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Category: China, Credit Backlash, Economics, Main, Recession Watch

About the Author ()

Bruce Henderson is a former Marine who focuses custom data mining and visualization technologies on the economy and other disasters.

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