Monday, November 17, 2008

The Baltic Dry and the S&P

The Baltic Dry Index is, basically, shipping rates for dry goods. It has nothing to do with the Baltics; it's been around since 1774 (!!) and it is not subject to, .....ahhhhh......policital "adjustments," are other typical US Gummint economic measures. (Recession, anyone?)
Since the number of ships at sea is relatively constant, the Index is (virtually) a perfect supply/demand curve demonstration.
As to the drop: some state that it is a factor of the liquidity crisis; that letters of credit are no longer as easily negotiated as they used to be.
Another factor has to be the demand side. I've yet to see an article which describes "demand ex-Letters of Credit" --or which, in other words, shows the effect of demand, pure (or letters of credit, pure.)

1 comment:

Barry said...

The predecessor of the Baltic Dry Index, which was the Baltic Freight Index, was first quoted in 1984.