Search This Site:

Thursday, 2 February 2012

International trade continues to decline

Shipping rates continue to fall, having never recovered after collapsing by 90% in 2008, measured by the "Baltic Dry Index" (BDIY:IND).  Low rates reflect market expectations that international trade will remain very low or decline further.

At least two factors work against increased international trade:  firstly, increased currency exchange rate volatility, amplified by global quantitative easing, which makes long term export-import business plans very costly if not impossible;  and secondly the impetus to revive national domestic economies by repatriating industries, in preference to expanding global free trade, by covert protectionism.

One scenario is that quantitative easing money printing would be increased to provide liquidity to foster international trade, but, much of that increased liquidity appears to end up funding speculative international trading, which increases currency exchange rate volatility, which impedes international trade.

I acknowledge Tyler Durden for his "zerohedge" article.

No comments:

Post a Comment