December 13, 2012
Source: Mac Slavo, Guest Post
Amid growing concern that the global economics teetering on the edge of a total collapse, governments in Europe, China and the United States continue to manipulate statistics in an effort to paint a picture of recovery and a return to normalcy.
But despite their best efforts to fabricate positive employment numbers, GDP growth, currency stability and stock market health, the stark reality is that the global economy is at a standstill, and has been since before the crash of 2008.
Economic growth is measured by how much we produce and consume, and before the bursting of the bubble there was an unprecedented level of consumption in America and throughout the rest of the world. But w
Consumption fell off a cliff and left America in its deepest recessionary environments since the 1930′s.
For those paying attention to the Baltic Dry Index, a global measure of the costs to transport raw materials, this collapse was reflected several months before panic gripped investors and led to stock market crashes around the world.
Introduced in 1985, the Baltic Dry Index first and foremost is a measure of the global shipping rates of dry bulk goods, mostly consisting of vital raw materials used in the creation of other products. However, it is also a measure of demand for said materials in comparison to previous months and years.
Source: Alt Market
In essence, the price of transporting goods collapsed – to its lowest levels ever. That old theory of supply and demand was the culprit. You see, when there is no money to buy goods, there is no demand for said goods. This puts pressure on transportation companies who make a living moving products from port to port around the world. But because no one was able to consume, there was no need to ship anything. This forced transportation companies to reduce their freight rates in an effort to stay competitive.
As the chart above demonstrates, there was a massive drop-off in prices during the summer of 2008, at right about the time Americans were getting wind a recession was looming. There was a slight bounce in response to the multi-trillion dollar bailouts promised by Congress and Presidents Bush and Obama, but the bubble created on cheap borrowing and negligent lending couldn’t be blown back up.
Four years on, with literally tens of trillions of dollars infused into the system by central banks all over the world, transportation rates for goods remain at near all time lows, suggesting that our governments’ best efforts have failed miserably.