Baltic Index Warns of Disaster Closing In

ZeroHedge carried an article on the Baltic Dry Index which measures global trade and announced, “It’s Official: The Baltic Dry Index Has Crashed To Its Lowest November Level In History.”

The Baltic Dry Index measures freight travel around the world. If freight is not traveling from one country to another, then economic activity is probably in the doldrums and so are a variety of exporting economies.

Here, from Investopedia, the definition of the Index:

A shipping and trade index created by the London-based Baltic Exchange that measures changes in the cost to transport raw materials such as metals, grains and fossil fuels by sea. The Baltic Exchange directly contacts shipping brokers to assess price levels for a given route, product to transport and time to delivery (speed).

Autumn is supposed to be a good time for the index. In other words, consumers are purchasing more goods for a variety of reasons. The school year is beginning and so is the holiday season.

The actual growth arc is from the middle of summer through Thanksgiving. But that arc has been notably absent this year as the Index has moved disturbingly down during the season of its greatest supposed strength.

At a level of 631, this is the lowest cost for Baltic Dry Freight Index for this time of year in history.. and within a small drop of an all-time historical low.

As this Index is quite representative of economic activity worldwide, the plunge probably explains the hesitancy of central bankers to follow through with their plans to declare the Great Recession vanquished and begin the necessary task of hiking rates.

What the Baltic collapse shows us clearly is that the past declarations of economic recovery are part of a larger pastiche of economic mythology. The internet itself has exposed the entire central banking manipulation, which is intended to impress without actually creating any significant successes.

It cannot proclaim success because the securitization of debt is not a logical operation. This was the reason the mathematician John Maynard Keynes was recruited to create a theoretical edifice that justified a nonsensical monetary approach.

The issue Keynes explored was the business cycle and this was investigated as well by the free-market theoretician Ludwig von Mises. Along with his disciple FA Hayek, Mises determined that the modern business cycle is the product of central bank monetary stimulation.

First the central bank stimulates by keeping interest rates too low and eventually the economy is flooded with cheap credit. This causes an artificial boom that eventually turns into a steep bust.

For a while people feel rich because of all the easy credit and often overextend themselves by buying expensive cars, houses and other appurtenances of success. But when the bust begins, many of these same individuals lose their jobs, their money and eventually their houses and everything else.

Keynes on the other hand began AFTER the bust and suggested that government could alleviate the bust by printing additional money – thus re-stimulating the economy. But in retrospect this was a ridiculous prescription.

The entire system is a kind of hoax. It doesn’t work. It wasn’t designed to work but to create serial collapses. Those running the system may or may not be fully aware of its depredations but the debasement continues nonetheless. It’s constructed that way.

And that is why we know the end is near. The Baltic Index indicates that unlike some other times in the past, this reflation has failed. We could have predicted it because this time the Fed didn’t bother to clean out the rot and ruin before the money printing began. That means we are not at the beginning of a new bull cycle but merely stuck in the remnants of an ongoing bear market that started either in 2008 or 2002.

By not allowing the larger economy to deflate back to “normal,” central banks have piled one bubble on top of another. The quadrillion dollar market in derivatives is just one example. But this latest Baltic Index is also an indication of how central banks, predictably, have failed.

No doubt we will see more attempts at reflation and central bankers will continue to talk about a “recovery” even though they are all but guaranteeing there will not be one. But this too is predictable as from what we can tell, the banking class wants a worldwide depression that can justify the implementation of a worldwide currency.

Here at TDV, nothing the bankers do fools us anymore. We don’t believe the propaganda and you ought to ignore it too. The collapse that is coming will be of the biblical-level variety and most people have no idea it is possible, much less probable. Many will get hurt in this collapse but those who can see clearly and prepare for the collapse in advance stand a much better chance to continue with their lives and lifestyles.

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Originally Appeared At The Dollar Vigilante