Deflation revisited……

12 01 2016

Whilst the economic news on the MSM are continually full of bullshit – the US economy is taking off, etc etc blah blah – the real news are looking terrible.

It’s actually hard to even know where to start when beginning an article like this, but the first hint of something seriously bad happening came from this source:

Commerce between Europe and North America has literally come to a halt.  For the first time in known history, not one cargo ship is in-transit in the North Atlantic between Europe and North America.  All of them (hundreds) are either anchored offshore or in-port.  NOTHING is moving.

This has never happened before.  It is a horrific economic sign; proof that commerce is literally stopped.

The reason commerce has stopped is simple: People are not buying things.   When people do not buy things, retailers do not sell things, so they do not order more goods for stock. 

When retailers do not order goods, manufacturers don’t make anything because there are no orders to fill.  When manufacturers do not make goods, they don’t order raw materials for manufacturing.

When there are no orders for raw materials, commodities sellers do not sell raw materials. When no raw materials are sold, there is no shipping by large cargo ships, (or railroads or tractor trailers) to move anything.

Put simply, the global economy is LITERALLY stopping.  Right now.  Today.

My initial reaction was to turn my bullshit filter on full tilt…… no way, I thought, could this happen, the commerce and trade between the two continents at the top of the Atlantic is just too big for this to actually occur. So I went to the marine traffic website to check this claim, and found a complicated interactive map that frankly I haven’t got time to decipher fully.  It does appear, however, that since that article was published (8/1/16) some shipping is happening.  Could it have been a freak coincidence?


You may remember that I recently quoted the Baltic Dry Index just after the GFC hit (I had never heard of the BDI before then) to find it was at its lowest since August 1986 and even lower than at the time of the GFC…!  Here’s what I found……

Jan 11 (Reuters) – The Baltic Exchange’s main sea freight index, which tracks rates for ships carrying industrial commodities, slid to a fifth consecutive record low on Monday on economic worries about China and a surplus of vessels.

The overall index, gauging the cost of shipping dry bulk cargoes including iron ore, cement, grain, coal and fertilisers, fell 3.26 percent to 415 points.

The index has fallen by more than 13 percent in 2016.

A downturn in dry bulk shipping has worsened significantly in recent months as demand for iron ore and coal has declined in the response to slower economic growth in China.

Then we have the Guardian publishing this…:

Europe has seen nothing like this for 70 years – the visible expression of a world where order is collapsing. The millions of refugees fleeing from ceaseless Middle Eastern war and barbarism are voting with their feet, despairing of their futures. The catalyst for their despair – the shredding of state structures and grip of Islamic fundamentalism on young Muslim minds – shows no sign of disappearing.

Yet there is a parallel collapse in the economic order that is less conspicuous: the hundreds of billions of dollars fleeing emerging economies, from Brazil to China, don’t come with images of women and children on capsizing boats. Nor do banks that have lent trillions that will never be repaid post gruesome videos. However, this collapse threatens our liberal universe as much as certain responses to the refugees. Capital flight and bank fragility are profound dysfunctions in the way the global economy is now organised that will surface as real-world economic dislocation.

The IMF is profoundly concerned, warning at last week’s annual meeting in Peru of $3tn (£1.95tn) of excess credit globally and weakening global economic growth. But while it knows there needs to be an international co-ordinated response, no progress is likely. The grip of libertarian, anti-state philosophies on the dominant Anglo-Saxon political right in the US and UK makes such intervention as probable as a Middle East settlement. Order is crumbling all around and the forces that might save it are politically weak and intellectually ineffective.

It’s hard to not feel like it’s all happening. Oil is trading at under $33 as I write, and the ASX and the All Ordinaries are both trading under the psychological 5000 barrier, and still falling.

I have to spend the proceeds from selling in Queensland quick, while our money is still worth something….. if all my predictions come true, it will be my worst nightmare coming to life, and I will have lost the gamble to move.

And if you have some spare time, read about Australia’s pathetic response to peak oil here on Matt Mushalik’s site.

The continuing talk of a global oil glut lulls Australian motorists to believe that everything is fine while actually this country’s petroleum stock holdings are minimal. When things go wrong in the Middle East no one will help Australia as IEA obligations have been willfully ignored by both ALP and Coalition governments.

Lots of charts and data to keep you entertained……



13 responses

12 01 2016
Chris Harries

Warning: I’ve seen this on another site and it was reported and accepted as a hoax story – i.e about Atlantic trade..

12 01 2016

Where did you see it?

12 01 2016
Chris Harries

It was mentioned on Gail Tverberg’s site (latest story) in the comments, but then subsequent commentators reported it as being confirmed as a hoax story. I know nothing more than that, but would be worth taking it with a grain of salt maybe unless confirmed.

12 01 2016

And when trade stops, banks that have lent money based on a prediction of all that trade, go into fear mode. The whole thing could lock up this week.

Chinese stocks are trading at the lows of the day after Overnight HIBOR rates (Hong Kong’s interbank borrowing rate) exploded a stunning 939bps to a record high 13.4%. It is clear that banks are utterly desperate for liquidity and/or are extremely concerned about one another’s counterparty risk. This has dragged HSCEI down 5% (to its lowest since Oct 2011).

Something just snapped…

12 01 2016

The Royal Bank of Scotland (RBS) has advised clients to brace for a “cataclysmic year” and a global deflationary crisis, warning that the major stock markets could fall by a fifth and oil may reach $US16 a barrel.
The bank’s credit team said markets are flashing the same stress alerts as they did before the Lehman crisis in 2008.
“Sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small,” it said in a client note.

Read more:

12 01 2016

Hopefully, the PTB will be able to hold it all off until after the US Presidential election in November. In the meantime, people with cash should now purchase things they’ve been intending to buy anyway, plus storable food, medicines, clothing and footwear, toiletries, firewood etc etc.

12 01 2016

That’s ME…!!

12 01 2016

Go for it Mike,

The saying comes to mind ” better to have failed attempting to do something worthwhile than to have succeeded doing something of no importance what ever”

Best of luck mate I think you are doing something worthwhile with your blog and shift.

12 01 2016

Thanks Don……..

12 01 2016
Brendon Crook

I agree with Dons comments. You have the land & the big shed now Mike & if anyone can make a go of anything it would be you.
Also your blog & it’s readers provide plenty of worthwhile & valuable links for reading.

12 01 2016
Brendon Crook

I agree with Dons statements.
Also you have the land & the big shed Mike. If anyone can make good in a bad situation it’ll be you.
Your blog & it’s readers offer so much in the way of valuable links & good reading. All worthwhile in these rapidly descending times.

12 01 2016
Daniel Koeppel

Saw Collapse BC1177 by Eric Cline; Many parallels !?

13 01 2016
12 jan |

[…] – Deflation revisited…… […]

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