	Generational Dynamics
	Forecasting America's Destiny ... and the World's

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Generational Dynamics Web Log for 14-Jun-05
Worldwide shipping is slowing down, indicating a softening of world economic growth

Web Log - June, 2005

Worldwide shipping is slowing down, indicating a softening of world economic growth

Have you ever heard of the 'Baltic Dry Index'? It's been falling sharply.

The Baltic Dry Index (BDI) measures the shipments of "dry-bulk cargos," commodities like iron ore, grain, cement and coal, shipped in bulk on huge freighters traveling the seas around the world.

The BDI has a colorful history since it was established in 1744 by merchants and ships' captains chitchatting at the Virginia and Baltick Coffee House in Threadneedle Street in London.

The BDI is considered to be a reliable leading economic indicator for manufacturing, since it measures commodities that will eventually be used in the manufacture of finished goods.

Thus, the fact that it's down 50% since December, with the fall accelerating in recent weeks, signals a probable fall in manufacturing in the months to come and an economic downturn.

This is consistent with measures of worldwide manufacturing activity. As we reported two weeks ago, manufacturing activity was the slowest in two years worldwide, according to the JP Morgan global report on manufacturing. According to the report, "The latest fall in the PMI was the result of slower growth in output and new orders, which led to a decline in employment."

The worldwide slowdown in manufacturing and shipping almost gives one the visceral feeling that the earth's rotation is slowing down.

According to an article in the Wall Street Journal, worldwide shipping is decreasing because worldwide economic growth is slowing. In particular, China has cut back substantially in imports of iron ore used in steel production.

Baltic Dry Index, 1996-present <font size=-2>(Source: FinData)</font>

Baltic Dry Index, 1996-present (Source: FinData)

The Baltic Dry Index is not widely reported, but you can find current and historical BDI data on the FinData web site.

As the adjoining 10-year graph shows, the BDI is normally fairly steady, but skyrocketed in 2003-4 as Chinese commodity imports went up. After reaching a peak in December, the Chinese imports have been falling.

From the point of view of Generational Dynamics, China is transitioning from a "generational unraveling" period to a "generational crisis" period, and appears to be unraveling into a civil war. China is on a kind of "crack cocaine" addiction -- it's been growing at 9-10% for 20 years, and is addicted to continuing that rate of growth. A recession is inevitable, and when it occurs, it could destabilize the entire country. Whether the sharp fall in the BDI indicates that a Chinese recession is coming remains to be seen.

The worldwide fall in shipping and manufacturing growth is also consistent with the Generational Dynamics prediction that we're entering a 1930s style depression. America's hollowed out economy has closed factories and shipped jobs to China. China imports commodities and exports finished goods, especially textiles and electronics, to America, that we pay for on credit. China then repurchases our credit in the form of Treasury bonds. Other countries play a part to a lesser extent, and many of their economies are worse off than ours. Some unplanned event, like a recession, that interrupts this symbiotic relationship could be the trigger that causes the major economic readjustment that Generational Dynamics predicts. (14-Jun-05) Permanent Link
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Generational Dynamics Web Log for 14-Jun-05 Worldwide shipping is slowing down, indicating a softening of world economic growth

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Generational Dynamics Web Log for 14-Jun-05
Worldwide shipping is slowing down, indicating a softening of world economic growth