Credit freeze up : Shipping used for moving trade matter around the world is in doldrums .No finance ,no letters of credit .
Shenanigan bailouts,share prices,credit freeze up in the financial world are one thing ,but keep your eye on the spreading down to earth real material world effects on the future of Australian resource sales and the effects on our economy and prosperity. As capitalism runs on credit ,when credit and guarantees stop flowing so does the movement of matter for production and consumption. Future Oz depression?
"The World Trade Organisation hosted a meeting on trade credit in Washington Wednesday to highlight the rapid and accelerating deterioration in trade finance as an urgent priority for public policy.
I look at the precipitous collapse of the Baltic Dry Index and I wish them Godspeed."
Financial Crisis Triggers Disruption in International Shipping
Nov. 7 (Bloomberg) - At least 20 percent of the vessels most commonly hired to haul coal and ore are sitting empty as steelmakers cut output and dwindling trade credit halts deliveries, Lorentzen & Stemoco A/S shipbroker Kjetil Sjuve said.
Fifty to 100 so-called capesizes, each bigger than The Trump Building in New York, have been unable to find cargoes or their owners won't accept rental rates that have plunged 98 percent in five months, Sjuve said by phone today. Normally about 250 such carriers compete for spot bookings, he said.
``There are simply no cargoes, Sjuve said from Oslo. ``It's primarily the steel market but it's even more difficult due to financial markets and letters of credit in particular.
ArcelorMittal, the world's biggest steelmaker, on Nov. 5 said its global output will decline by more than 30 percent. Cia. Vale do Rio Doce, the world's biggest iron-ore producer, last month said it will cut production. Of the $13.6 trillion of goods traded worldwide, 90 percent rely on letters of credit or related forms of financing and guarantees such as trade credit insurance.
Letters of credit are centuries-old instruments that transfer payments internationally from buyer to seller once shipments have been delivered.
Capesizes that were attracting rates of $233,988 a day as recently as June are now available for $4,793, according to the Baltic Exchange in London. That's below the cost of paying for crew, insurance, maintenance and lubricants.
Capesizes are the second-largest commodity transporters, after very large ore carriers. The Baltic Dry Index, a measure of shipping costs across different ship sizes, has slumped 93 percent from a record in May.
more info at :
http://www.globalresearch.ca/index.php?context=va&aid=10969
And see :
Systemic Risk, Contagion and Trade Finance - Back to the Bad Old Days.
Quote:
" If cargo trade stops, a whole lot of supply chain disruption starts. If the ore doesn't go to the refinery, there is no plate steel. If the plate steel doesn't get shipped, there is nothing to fabricate into components. If there are no components, there is nothing to assemble in the factory. If the factory closes the assembly line, there are no finished goods. If there are no finished goods, there is nothing to restock the shelves of the shops. If there is nothing in the shops, the consumers don't buy. If the consumers don't buy, there is no Christmas.
Everyone along the supply chain should worry about their jobs. Many will lose their jobs sooner rather than later.
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.
Everyone along the supply chain should worry about their children going hungry.
When that happens, everyone in governments should worry about the riots.
Controlling access to trade finance determines who loses their jobs, whose children go hungry, who riots, which governments fall. Without dedicated focus on the issue of trade finance and liquidity from those in the emerging world most interested in sustaining the growth of recent years, little progress can be expected.Trade finance is rapidly communicating the stress on bank liquidity to the real economy. It presents a systemic risk much more frightening than the collapsing value of bits of paper traded electronically in London and New York. It could collapse the employment, the well being and the political stability of most of the world's population.
The World Trade Organisation hosted a meeting on trade credit in Washington Wednesday to highlight the rapid and accelerating deterioration in trade finance as an urgent priority for public policy.
I look at the precipitous collapse of the Baltic Dry Index and I wish them Godspeed."
related:
The Financial Review commodities column 27/10/08 says spot iron ore price has fallen to US $70 a tonne at Australian ports ."Australia's largest commodity has lost more than half its value in the last 3 months."
Macquarie banks steel analysists said "What we heard is that their orders have actually gone down to zero over the last 2 weeks"
Consider the following and what it means for future iron ore and coal exports from Australia as demand collapses.
Real world stuff."Scrap-Steel Buyers Cancel Purchases as Prices Tumble "
(extract)
"Scrap steel buyers in Asia are canceling purchases after prices tumbled more than 80 percent in the past four months as demand slumps, traders said.
``There are buyers in China, India and Europe that are literally fighting for their survival,'' said Bob Garino, director of commodities at the Institute of Scrap Recycling Industries Inc., a Washington-based trade association representing more than 1,600 companies worldwide. ``Steel prices have fallen off a cliff, and they just don't have the money to honor their contracts..
Every economic system based on profit is simply the organization of material production and distribution of the working peoples created surplus product or value not consumed by its producer .
Capitalism runs on credit ,money loaned or invested as capital to make more money "profits'.
In the final analysis a human economy is based on material production from the materials provided by nature and circulation in exchange between the producers of commodities to satisfy human needs but capitalism has twisted this to a system where production and distribution of wealth can only occur if a profit for capital can be got. Owning the means of production in class society and in capitalism especially ,private capital ,old accumulated labour created value loaned on credit, determines the distribution of wealth in the economy .
These days a "globalised ' economy. World trade appears on the surface as simply the movement of material commodities that satisfies human needs .
But for capital,it has its own rational,the transfer of surplus value ,so that a value and surplus value created over there may be realized as profit at sale here and vice versa. There is,on a world scale no 'balance of trade"only winners and losers of surplus value.
Two world views .
Capital fears that its capital cannot circulate profitably and grow,while humanity fears that the mater will not circulate from food to other necessary things and its children will not grow as the owners of the means of production cut back on wage workers.
Globalised Markets in crisis. When the loan money markets /credit supply stop moving in capitalism so does the movement of circulating matter that satisfies human needs or fancy.
Production itself requires not just investment of capital but also requires material circulation for productive consumption . For example the flow or movement of matter Iron ore and Coal to Chinese or Korean steel mills for later conversion into finished consumer commodities . ..
Fear of lack of profitability stalks the capitalist bourses while fear of economic depression and poverty stalks the ordinary people. Capital fears that its capital cannot circulate profitably and grow,without that ability to grow capitals owners may have no wish to invest in production or distribution.
While humanity fears that the matter will not circulate,from food to other necessary things and its children will not grow and live a full human cultured life.
Re: And Yes it was all very predictable
They are not going to tell anyone how bad it really is until it is
way too late. Perhaps when they have no other choice who knows?
The
first phase of the build up to a Level 4 Civilization must establish
credible examples of leaver-giver-tribalism. This will involve
like-minded people forming a number of free city pilot projects. During
the first phase, the focus must be on demonstrating that people can
live in a tribal way, amidst the spike technologies and scientific
modernity of a post-capitalist economy.
From the lessons learned, and the demonstrations of abundance produced
by the free city pilots, it will be practical to set out guidelines and
provide resources and skilled people to assist the formation of a
second wave of secessionist cities and regions. All the energies of the
new leaver-givers must be directed towards these ends, and the
controlled economy of the old order must be left to its own devices. It
is not our function, as builders of the new society, to tear down the
old one.
That the old economic order is destroying itself, and taking the whole
world towards a replay of the Argentinean crisis on a global scale, is
no secret in financial circles. It's just not featured on the 6 o'clock
news or the pages of the mass-media newspapers. The following excerpt
from the August 12, 2004, edition of the Dow Theory Letters, a
financial newsletter by Richard Russell in the USA, captures what the
people inside the economic and financial sectors know and accept. It's
scary and it's true.
* "... In the end, the US is fated to drown in liabilities, and in the
end the dollar will fall to the point where it will no longer be
accepted as the world's reserve currency. But until then, the world,
really the Asians, will "play the game" in which they will continue to
accept and accumulate dollars.
Why are they doing this? they're continuing to accept dollars because
this process allows them to continue to sell their products to the US.
Yes, it's a game. Yes, it can't go on forever. Yes, the US and the
dollar will finally drown in liabilities. Yes, this is ultimately what
the bear market is all about. And yes, there really seems to be nothing
that will reverse this process."
* "The whole system is obviously doomed, but the world's politicians
don't think in terms of "doom." Doom is in the future, and politicians
are concerned with "now," and the next election.
There is no need for anyone to overthrow the old order based on
capitalism. The societal flaws and lethal memes that are associated
with takerism and capitalism are already well on the way to destroying
the empires of the industrial age, New knowledge, new technology, and
new thinking are helping to accelerate the process. Time is running out
for the old order.
Our concern, as leaver-givers, needs to be with the world beyond the
demise of capitalism. We need to have a social and economic logic, and
a system of transition, in place well before the looming meltdown. We
must have the rudiments of a new civilization and a new society ready
for people to join when their old world fails them.
This is the most important work and thinking that we can ever do on behalf of our fellow beings.
Lothar,
September, 2004
Go forward in peace. And always remember the line from Gravity's Rainbow:
"If they can get you asking the wrong questions, they don't have to worry about the answers."
Re: Credit freeze up : Shipping used for moving trade matter aro
Colombian riots break-out amid pyramid scheme collapse
Colombia has declared a state of emergency in response to widespread riots.
The violence broke out after investors lost millions of dollars in the collapse of pyramid schemes.
Under the state of emergency the Government has special powers to
increase prison terms for illegal money collecting and to seize money
from businesses involved in such activity.
President Alvaro Uribe says money recovered from the illegal businesses will be repaid to poor investors who lost their savings.
He added, however, that richer investors should have known better and would have to suffer some of the financial blow.
The pyramid style schemes promised extravagant returns and while most
investors were poor, senators and police officers were among those who
lost out.