Hi Jnana,
I agree that the ratio between the price of shipping is not necessarily in ratio with the amount of goods being shipped, for example, if a ship is only half full, then the cost of shipping logically would be half the price.
However, there is a ratio. The index will still give an idea of the volume by publishing the price. This would make a lot of sense to the people who deal with the shipping industry, which is not my case.
There is another spin off to this also which needs to be added in. As we know the US dolar is, in general, the currency for international trade. We also understand that if the dolaris in high demand the value against other currencies rises. The opposite,of course if the dolar is not in so much demand.
As we can see from the BDI there is a huge lull of interest for the $US as the shipping market is huge (and expensive) and the prices have fallen over 90%. This will contribute to lower the value of the dolar against other currencies, thus making the purchase of goods more expensive for the US to buy from other countries, probably creating yet another drop in imports basically killing of the shipping industry as the pricing for shipping will be no onger viable for the ships to leave port.
I know the argument is simplified, and it needs to be so that we can understand the possible problem more easily.
As I see it, exporting countries, as is already happening here in Brazil, will have to sell products to the national market, which will mean in the short term a drop of income for the exporting companies, reduction of infrastructure, unemployment. In the mid term, companies that have re structured and new companies will evolve to produce more at national level and the whole ball game will start over again to find other countries to trade with.
Importing countries, on the other hand, (like the US, Russia, Germany) will suffer lack of products, particularly food stuffs, and their prices should rise creating a short term inflation to try and cover the cost of the price increases. Money will become short at street level and many will lose their homes, will have to cut back on luxury items, which will hit national semi durable good companies, which will lead to unemployment. The exit of this problem will be slower, as a loaf of bread is worth more than a hi-fi unit when you're hungry, and the tendency would be for the food producing countries to have the upper hand.
Once the source of food has been re established, then the technology based countries would come back in to it.
Of course we would have to equate a war or two in there somewhere.
I hope I've not gone off topic too much. These are just thoughts coming out.
I'd be interested to know of you thoughts.
Best regards,
Steve
Quote:
Originally Posted by Jnana
Steve,
Right. But, a small change in shipping demand (10%-20%) can cause a large change in the price of shipping (90%), and BDI reflects the latter. A 90% drop in the BDI does NOT mean a 90% drop in the quantity of goods shipped, which is what some of the articles seem to be implying.
BTW, I don't have a problem with people posting articles of this nature. I'm not taking issue with the poster, just with misrepresentation of what the BDI means in some of the articles. Such as:
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