Well folks, given our final research upon Global Stock markets, I think it is time for us to demeanour during what is in store for us in a Global Economy. As everyone knows we have been positively living in a little sparkling times. There have been as great many problems starting upon around a universe as great as it seems to be removing from bad to worse with any passing day.
We have seen problems in Greece's incapacity to form a government, contagion being widespread to Spain with a 4th largest bank wanting a bailout, bond spreads have been sky rocketing in Spain, Italy as great as Portugal - rounded off as great much to mention! So how do we view a Global Economy starting forward? What indicator can we use to sign a health of a tellurian economy?
Baltic Dry Index
So what is a Baltic Dry Index?
This index measures a cost to carry dry burden over a world's oceans. The cost of shipping dry commodities, such as coal, iron ore as great as grains, forms a basement for a BDI. When tender materials have been shipped, it is given they have been needed to be made in to finished products as great as when grains have been shipped, it is given somewhere there have been direct for a product. In alternative words it represents mercantile activities that have been starting to be generated.
Forward as great as Backward Looking
This index is one of a leading indicators for measuring a mercantile activity. The BDI is one of the'Forward Looking'economic indicators, mea! ning it acts as a precursors of mercantile wake up that have been nonetheless to begin. Whereas consumer spending as great as alternative mercantile indicators are 'Backward Looking',meaning they have been a outcome of what had already happened. By analyzing a BDI, we have been means to sign a turn of mercantile wake up that is starting upon around a universe by a tellurian direct for tender materials as great as infrastructures.
Below is a Chart of a Baltic Dry Index for a past 10 years. As we can see a index rise during a early partial of 2008 it strike an all time tall of about 11,400 points usually before a Global Financial Crisis struck. After that it went off a cliff as great as forsaken some-more than 10,000 points to reduction than 1000 by Dec 2008. This represents a dump of some-more than 90% from a peak. After that it usually managed to recover to about 4643 points that is usually 35% from a peak.
The three year Baltic Dry Index (BDI) as shown next seems to be loosing belligerent again. Since a 2008 predicament a highest point available is during 4643 upon eighteen Nov 2009 as great as a lowest available was in Feb 3rd 2012 during 648 points. That represents a dump of 3995 points or rounded off an 85% drop. It managed to miscarry in Feb to a tall of 1157 as great as it is right away again sealed next a 1000 mental turn again during 986 as of yesterday.
However a bad headlines is that it dipped next a MA50 line that is an indicator of consumer sentiment. So we expect a BDI index to close reduce shortly as great as probably will exam a new low of 648 that it set in Feb this year.
Why a BDI dropped?
One of a categorical reasons for a dump is a decrease in European imports that also resulted in a decrease in China's exports. Due to a financial predicament in Europe a mercantile wake up had slowed down. From production to consumer spending there had been a notable decreased in demand.
Another is a decrease in universe traffic given a index represents a conveyance of dry products that especially consists of line as great as tender materials. In a way a dump in a index represents a dump in transformation of products worldwide as great as as a outcome a decrease in universe trade
According to Tianjin Shipping Line, tellurian dry-bulk genius will enhance by14 percent this year that will outpace a 6 percent rise in demand. The increased in genius has caused a Baltic Dry Index, to dump 47 percent in a past year.
The third reason is a over supply of universe dry bulk swift in 2011. According to ISL's (International Shipping Line) interpretation upon World Ship Building, a dry bulk swift is attack over genius as in 2011 alone there is an blast in a further of new ships. Further some-more according to China owned Cosco Shipping Line, it foresee a 32% dump in dry bulk traffic this year due to a oversupply of universe shipping swift joined with a dump in demand. Commodities conveyance this year will dump to 959 billion tons from 1.42 trillion tons final year.
BRIC's mercantile contraction
As a outcome we don't expect a BDI to recover really shortly as great as in fact we have been already saying a contraction of mercantile wake up in a little large economies especially a BRIC nation. BRIC is an acronym invented by Jim O'Neill of Goldman Sachs to group together building nations of Brazil, Russia, India as great as China..
China's skill prices keep starting down after dropping for! some-mo re than 2 years after a government's step up a brake to carry out a housing bubble. Last week a supervision survey shows that out of 70 cities surveyed, 46 available a dump as great as usually 3 available a rise. Since real estate make up of some-more than 10% of a Gross Domestic Product (GDP), a continual dump in home prices will not prophesy great for China's mercantile outlook.
China current mercantile process is to aspire to mercantile expansion of during slightest 8% though during a meant time wants to reign in skill prices. This competence outcome in what we called a 'Paradox of Growth'. Due to a weakening of mercantile expansion final year, a authorities final week announced a second cut in a bank's Statutory Deposit Ratio that will giveaway up some-more capital for banks to loan out. At a meant time a supervision is not loosening any of a measures that have been implemented a integrate of years ago to carry out a housing bubble. Well, we cannot have 2 things in one go, meaning we cannot enlarge a turn of mercantile wake up without having to disencumber up a controls in a skill market.
Paradox of Thrift as great as Growth
This is similar to a 'Paradox of Thrift'. It is a situation where a authorities cannot grasp increased mercantile wake up by consumer spending while during a same time they foster savings among a people. When people save some-more afterwards reduction income will be outlayed as great as as a outcome will outcome in a decrease turn of mercantile activity. A great example will be Japan.
Brazil is a world's 7th largest economy, also seen a share of mercantile decline. In 2010, Brazil's manage to buy grew during a rate of 7.5%, after a miscarry from a Global Financial Crisis. In 2011, a manage to buy usually grew during 2.7% compared to 4.3% ad 9% for alternative BRIC nations like India as great as China respectively. Despite three rounds of interest rates cuts that now stands during 9% that is hist! orically low, a manage to buy is still contracting. The categorical reason for not having any effect is that a consumers have been already indebted up to their eyeballs.
The direct for loans forsaken 8% given a beginning of a year given defaults have been rising as great as banks have been removing some-more regressive in their lending policies. More than 8% of their loans have been 90 days overdue.
So in conclusion, we have been bearish towards any miscarry in tellurian economies during any time soon. With a risk of Europe imploding, a risk of a contagion being widespread to alternative countries as great as regions had been heightened. Global economies have been already in a slack as great as stays frail as great as if a contagion is not contained afterwards it competence assistance pull a tellurian manage to buy in to a Depression mode.
Malaysia Chronicle
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