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Generational Dynamics Web Log for 1-Feb-2010
1-Feb-10 News - Trouble for Baltic Dry Index, Yemen ceasefire

Web Log - February, 2010

1-Feb-10 News - Trouble for Baltic Dry Index, Yemen ceasefire

TARP inspector reports to Congress

TARP inspector issues a quarterly report to Congress

The Quarterly Report to Congress by the Obama administration's Special Inspector General for the Troubled Asset Relief Program (SIGTARP), finds that all the abusive practices that led to the financial crisis that began in August 2007 are still being used. The inevitable logic is that a much larger financial crisis is yet to come.

See my complete analysis of this report in: "Report from TARP Inspector: We're driving off a cliff in a faster car."

Trouble Brewing for the Baltic Dry Index

The Baltic Dry Index is poised for another crash, according to an analysis on SeekingAlpha.

Recall that the Baltic Dry Index (BDI) is a measure of shipping costs for cargoes in "capesize" vessels -- vessels that are too large to fit through the Suez or Panama canals, and so must go around the Cape of Good Hope or Cape Horn. These vessels transport the huge cargoes of copper, iron ore and other commodities.

The Baltic Dry Index surged to bubble levels in early 2008, thanks to enormous Chinese demand for commodities prior to the Beijing Olympics in August. Once the Olympics games ended, Chinese demand plummeted, creating a chain reaction that brought world wide trade and transportation almost to a standstill. The Baltic Dry Index plummeted an astounding 95%. (See "World wide transportation and trade sink farther into deep freeze.")

Dry Bulk carriers order book <font size=-2>(Source: SeekingAlpha)</font>

Dry Bulk carriers order book (Source: SeekingAlpha)

In the last year, the BDI regained about 20% of what it lost in the crash, but now a new analysis indicates that it's poised to collapse again.

During the boom of early 2008, everyone thought that the bubble would never burst, and orders were placed for 1400 dry bulk carrier vessels to be delivered in 2010. As the adjoining graphic shows, the rate of delivery for the vessels is many times higher than the normal trend rate in previous years.

This is just one more "thing" that's coming at us in the next few months. There's a huge, growing shadow inventory of unsold homes in the US, ready to trigger a housing panic. Large banks are taking enormous risks, counting on the belief that they'll be bailed out if there's trouble. China's bubble economy is close to bursting, and the "PIIGS" countries in Europe (Portugal, Ireland, Italy, Greece and Spain) are all nearing default on their bonds, also expecting to be bailed out.

Yemen government offers conditional ceasefire to Houthi rebels

Yemen government forces claim to have killed 20 Houthi rebels in a fight in the northern provinces.

The Houthi rebels have accepted the government's offer of a ceasefire, and have agreed to comply with the five conditions, according to a report by News Yemen.

The five conditions are "that the rebels disarm, withdraw from sites they control, reopen blocked roads in Sa'ada, hand over weapons and military equipment they have taken over, release captured troops and civilians and stop attacks on territories of neighboring Saudi Arabia," according to the article.

Well, actually that's six conditions, and according to an Al-Jazeera report, the Houthi rebels have not accepted the sixth condition, stopping attacks on Saudi Arabia.

Yemen is fighting on multiple fronts. There's a Houthi insurgency in the north, and al-Qaeda insurgency in the south, and a secessionist movement in the south. In order to keep the country from deteriorating into complete chaos, the US is becoming increasingly involved. (See "Yemen wars escalate rapidly, as US provides military support" and "US military 'deeply involved' in Yemen.")

This ceasefire offer is obviously a political dance being performed by the two sides. From the point of view of Generational Dynamics, this fight is in the approach to a generational crisis war, where short-term ceasefire agreements are typical, before the war bursts into full genocidal fury.

Additional Links

The biggest villain in today's financial crisis was the securitation of debt that created the "toxic assets" that were fraudulently sold to investors by Goldman Sachs and other banks. However, the securitization market is not new, according to the NY Times. Quoting a report by the National Bureau of Economic Research, the article says that the original wave of securitizations took place in the 1920s, when the United States went on the greatest building boom ever. The details were quite similar to what's happened in the 2000s.

Russia's southern province of Dagestan, in the Caucasus region, is moving towards a war of ethnic and religious violence, according to the NY Times.

Fear of Iranian missile attacks is spurring American sales of anti-missile systems to American allies in the Mideast, according to Times Online. Saudi Arabia, Qatar, Bahrain and Kuwait are the customers purchasing the system. The article says that the Obama administration sped up the sales after it became apparent that its conciliatory Iran strategy has failed.

Iranian President Mahmoud Ahmadinejad says the nation will deliver a harsh blow to the "global arrogance" on February 11, the anniversary of the Islamic Revolution, according to Press TV. Mark your calendars.

(Comments: For reader comments, questions and discussion, see the 1-Feb-10 News - Trouble for Baltic Dry Index, Yemen ceasefire thread of the Generational Dynamics forum. Comments may be posted anonymously.) (1-Feb-2010) Permanent Link
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