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Letter Re: What Does the Drop in the Baltic Dry Index Really Mean?
Dear Jim:
I just read a
TEOTWAWKI warning
article [at Rense.com] stating that since the
Baltic Dry Index (BDI) was down
95%, [and that therefore] all shop shelves would be empty in short order. The
writer said that the BDI referred to the number of ships in transit. I thought
it only referred to the price charged for the transport of those ships and
that while the cost was indeed 95% lower, there were still a lot of ships in
transport. Can you clarify? - SF in Hawaii
JWR Replies:
I see plenty of scare pieces like that, mostly written by people that
aren't
looking at the whole picture. Here
is a videoblog clip, on the same topic.
You are correct that it is not the international shipping volume that
has dropped by 95%. It is just
the rates (shipping costs)
that have plummeted by 95%. Key
agricultural commodities like wheat and rice are still being transported in
quantity. But the balance sheets of the shipping companies are suffering because
orders for
imported consumer items like cars and plasma HDTVs have dropped to nearly
nil. Shipping
companies proactively raise or lower rates, as needed. During boom years, shipping
rates (bids) are high, but when orders decline, the BDI figure drops rapidly.
This is because the last
thing that any shipper wants is to set sail with a hold that is not nearly full.
The BDI is a useful indicator of global trade and global economic health.
It is indeed presently signaling economic depression. But it is not indicative
of imminent starvation in the US!
