The Clock Is Ticking...
Baltic Dry Index at 2069 points(the index tracks worldwide international shipping prices of various dry bulk cargoes and provides "an assessment of the price of moving the major raw materials by sea") is almost half of its peak a year ago and a mere shadow of its peak circa 2008 at 12,000 points.
Its a clear sign that demand for commodities have eased, and probably too. prices have peaked and declining.
Commodities prices move on fears (fear of shortage lead to price rise) while stockmarket prices move on hope (hope that things and events turned better).
Britain's jobless hits 2.5million and Spain is showing signs of strains from the ill effects of her spendthrift days, aside from Portugal, Italy, Greece, Ireland, Iceland... seems like the beggars' queue is growing fast and furious. Even in bustling China, urban and graduate unemployment is fast becoming a social time-bomb.
Nations have spent tomorrow's money yesterday.
USA is still reeling from the excesses of financial imprudence and the motto "spending your way out of poverty" is not dissimilar with 'borrowed time and borrowed money". If you print enough (paper) money to fill the gaps left by a financial earthquake, the real value of money declines. Why is US$ reasonably steady despite printing of more money. Confidence? It is US sheer military might and dominance thats providing confidence in the country, by extension US$.
Globalisation has deepens the World's interdependency and forced nations to unite, not by choice but to survive. Like banks, each is as confident as the other if they mutually underwrites each others' debts; hold tight! When the music stops, someone's gonna be hurt!
The rich nations have imploded. The poorer nations seem richer as the richer nations hollow out. This is not a symptom of growth but backsliding and contraction economically. While China and India (Asia as a whole) economies did improve but pockets of poverty still prevail and the North-South gap is everwidening.
Capitalism is greased by money and if real money are scarce, how will capitalism, by extension capital markets survive, prosper? Banana currencies will lead to inflation.
If cash is King; Real (value) money is the Ruler.
Whichever ideology you subscribe, nations, henceforth economies, cannot grow if unemployment is rife, banks are sick and political will are lacking; tough talks never see recovery, its tough actions. Recent Tea Party shows pop culture and wild promises winning the day.
When demand slows, prices falls, demand for capital goods fall too. Multiplier decline and without a cut in the ability to spend, the economy contracts further. There is no magic. If the house is crumbling, its better if it collapse fast. Restoration and reparation pave the way for recovery.
Politicians over-promised and under-deliver. Electorates love handouts and demand immediate reliefs. Everyone wants something on the cheap but someone has to deliver. Tea party is a 'horay' trip with shallow promises.
The world economies will likely (have to) tank and bring cost lower (deflationary) and make living more affordable. The current pump priming will not cure the ills of capitalism; its prolonging the suffering.
In the meantime, social unrests will surface (already happening in some Western countries), factors of production will be more efficiently and equitably distributed, and hopefully, cost of living lowered.
Booms & Bust are norms of/in life; cyclical changes affect everyone and you are not alone. In between the darkness of changes, there are silver linings.
Be healthy, happy and seek inner peace whilst the World undergo major changes not unlike the 'depression'. . its the degree of downturn, not if... or ... will it happen.
I am not a doomsayer but when bubbles burst, haemorrhage follows. Be there when good days are back.
In this make belief world, words are cheap and winners take all; fools aplenty.