Zoltan Acs
by Zoltan Acs
Wed Feb 11th 2009 at 10:20am UTC

Trying to Get a Handle on All of This

Measurement abounds! Stocks are down around the world over 50 percent from a year ago, GNP growth is down a little, unemployment has doubled but from a very low base, bank stocks are in the toilet. But how can we get a handle on what is actually happening around the world that represents a real number and not just financial.?

The Baltic Dry Index (BDI) is a number issued daily by the London-based Baltic Exchange. The index provides “an assessment of the price of moving the major raw materials by sea. Taking in 26 shipping routes measured on a time charter and voyage basis, the index covers Handymax, Panamax, and Capesize dry bulk carriers carrying a range of commodities including coal, iron, ore, and grain.”

The index is a good measure of future manufacturing output since many of the inputs that go into manufacturing are dry goods. Over the past year the index has fallen from 10,000 to just over 1,500! This sudden collapse in shipping prices and increase in capacity is one indicator of the depth of this crisis. It more than other indicators suggests that the economic recession is far from over and will most likely deepen.

What to do about this is clearly expressed in the major concerns today about trade protraction and bigger than thy neighbour policies that bought on the Great Depression of the 1930s.  We world needs to keep trade routes open and avoid protectionism as much as possible. For if we are not able to keep trade going the world will no longer be flat, or spiky. It will be chopped up.

2 Responses to “Trying to Get a Handle on All of This”

  1. hayden fisher Says:

    The Baltic Dry (or Freight as some refer to it) is up 127% since the December lows though and the Chinese economy is up 29% this year. Does that show the tip of a recovery? Will the tail left in its wake impede the recovery? This all started with a credit crunch that was allowed to linger too long and a housing collapse that was allowed to spread. Goods could not be shipped without letters of credit. Now that the engine has begun to run again, can it pull the balance of the economy out of the recession or is it too late for a quick or even moderately quick recovery?

  2. hayden fisher Says:

    I stand corrected, the BDI is actually up 200% from its lows led by China.