Depression and the next crisis - Global Trade Collapse

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Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Depression and the next crisis - Global Trade Collapse

Depression and the next crisis - Global Trade Collapse

I'm not overly  surprised that three times as many people are searching for the word depression vs recession on Google and it's been going on for several years.
Interest comes from the following countries (in descending order):
Australia, USA , Canada, UK, India, Sweden, Germany, France.

Journalists in respected newspapers such as the Boston Globe and Washington Post are starting to write stories comparing the 1930's  Great Depression to today's circumstances and what the impacts could be-here's my version. Frankly the 25 year long  Depression in the 19th century is a far better comparision.

The
G20 meeting in Washington was largely ineffective and no significant
actions came out of the meeting. Our global leaders showed no
foresight  for any actions that will stall, mitigate  or prevent the
next leg of the finacial collapse, which may well be global maritime
trade. The Baltic Dry Index
-an obscure ocean shipping volume index, which most people have never
heard of  is at record lows, dropping to 841 this week from a record
high of over 11,473 just last May. That means that the cost to charter
an ocean-going vessel is at or below the cost per ton to crew and fuel
the vessel.

"Industrial
Carriers Inc., a Ukrainian operator of about 55 vessels, filed for
bankruptcy last month. Zodiac Maritime Agencies Ltd., the shipping line
managed by Israel's billionaire Ofer family, said last month it may
idle 20 capesize ships, which typically haul coal and iron ore. That's
about 5 percent of the fleet operating in the spot market."

Why
the collapse ? Banks refuse to issue Letters of Credit because the
S&P GSCI index of 24 raw materials has dropped 31 percent this
month, its worst performance since at least recession.

 

Source: Baltic Dry Index Drops Below 1,000 for First Time in Six Years

 

What would be the
immediate consequences of a collapse of global trade? Well quite dire,
according to one scenario from one  blogger-  Naked Capitalism

 

"If cargo trade stops, a whole lot of supply chain disruption starts....

If
cargo trade stops, the wheat doesn’t get exported. If the wheat doesn’t
get exported, the mill has nothing to grind into flour. If there is no
flour, the bakeries and food processors can’t produce bread and pasta
and other foods. If there are no foods shipped from the bakeries and
factories, there are no foods in the shops. If there are no foods in
the shops, people go hungry. If people go hungry their children go
hungry. When children go hungry, people riot and governments fall."

 

The key factor to watch after the G20 meetings is how nations will deal with one another as the depression gets worse. 

 

Are we heading toward an era of National Egotism (concern for national self-interest, self-absorbtion) or
National  Altruism ( concern for the common global good, selflessness,
mindfullness). Nations like Russia and China seem to be heading toward
the former (after signing a 20 year multi-billion $ loan-for-oil swap,
which guarantees China a place at the head of the line, when crude oil
supplies start to dwindle from Russia.

 

So,
will falling crude oil supplies, shrinking water resources, shared
cross-boarder aquafers and harder to extract minerals be hoarded by
nations or shared between nations? What conflicts will result from this?

 

Walter Derzko

drb's picture
drb
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Joined: Oct 11 2008
Posts: 95
DHL pulls out of Wilmington Ohio

From: http://www.voanews.com/english/2008-11-17-voa37.cfm

Quote:

The international mail carrier Deutsche Post, or
DHL, plans to cut another 9,500 jobs in the United States on top of the
5,400 announced earlier this year because of heavy losses in its
express delivery operations. Most of the job cuts are in Wilmington,
Ohio where DHL's U.S. service hub is located. VOA's Mil Arcega looks at
the impact on the small Midwestern town.

In the town of 13,000 people, the news is
heartbreaking. Despite early warnings, Wilmington residents are stunned
that DHL, the town's largest employer, is pulling up stakes, leaving
thousands of people out of work.

"These are troubling and sad
times," says Ohio Governor Ted Strickland. Governor Strickland met with
local officials to find ways to replace jobs that will be lost. He's
pushing for federal funds to retrain thousands of laid-off workers.

"Extraordinary
efforts must be made to deal with what may be one of the worst economic
dislocations that we have faced as a nation," Strickland said.

DHL employee Dervin Bostic doubts retraining is the answer. Recently disabled, Bostic says losing his job will be devastating.

"I
probably lost 50 percent of the motion in my feet," Bostic said. "So,
whether I'm going to be able to do anything else, take care of my
family…(breaks down)"

Bostic is not alone.  

The ripple effect
could be severe. Local officials say at least 18 companies depend
directly on business generated by the package shipping company.

Wilmington Mayor David Raizk acknowledges difficult times are ahead but says the town will survive.

"We're
not going to have a ghost town," Raizk said. "This is a great
community, there's wonderful people that live here, and we're all going
to pull together to try to make something work."

The German-based company expects to lose more than $1.5 billion this year as a result of the economic downturn.

Wilmington residents say the damage to families will be harder to gauge.

From: http://www.commerce.gov/NewsRoom/SecretarySpeeches/PROD01_007460

Secretary of Commerce, Carlos M. Gutierrez wrote:

"...Foreign companies:

  • Employ nearly 5.3 million American workers—4.6 percent of employment in private industry in the U.S.;
  • They account for 14 percent of U.S. R&D expenditures;
  • And they are responsible for 19 percent of our exports of goods.

We do not always recognize the important economic contributions made by internationally-owned companies.

Such well-known brands as Shell, Michelin, Nestle, T-Mobile, and even Ben & Jerry's are foreign owned.

Germany's Siemens, with 66,000 employees in the United States, employs more people here than Microsoft and Coca-Cola combined.

In May, Governor Schwarzenegger and I had the
chance to visit Hitachi's plant in Torrance, California. The plant,
which re-manufacturers auto parts, is just one facility owned and
operated by a "foreign" company that employs 16,000 Americans...."

DHL's impact on a small town in Ohio is nearly insignificant when measured against the potential loss in jobs currently provided by other foreign owned companies (which makes the Ohio Governor's statement concerning DHL ("..may be one of the worst economic
dislocations that we have faced as a nation..") all the more poignant
.

 

joe2baba's picture
joe2baba
Status: Martenson Brigade Member (Offline)
Joined: Jun 17 2008
Posts: 807
Re: Depression and the next crisis - Global Trade Collapse

walmart sent out a letter to all its suppliers asking for their credit info. they want to make sure their suppliers will not be affected by the credit crunch.

i am sure they are watching the baltic dry index as well. 90% of their inventory comes from china.

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