#TheGreatUravelling

Something Just Snapped: Container Freight Rates From Asia To Europe Crash 23% In One Week

Zero Hedge,

2 August, 2015

One of the few silver linings surrounding the hard-landing Chinese economy in recent weeks has been the surprising resilience and strength of the Baltic Dry Index: even as Chinese commodity demand has cratered in 2015, this "index" has more than doubled in the past few months from all time lows, and at last check was hovering just over 1,100.

Many were wondering how it was possible that with accelerating deterioration across all Chinese asset classes, not to mention the bursting of various asset bubbles, could global shippers demand increasingly higher freight rates, an indication of either a tight transportation market or a jump in commodity demand, neither of which seemed credible.

We may have the answer.

It appears that the recent spike in shipping rates was analogous to the dead cat bounce in crude oil prices: a speculator-driven anticipation for a sustainable rebound that never took place. And now, just like with crude prices, it is all crashing down.... again.

According to Reuters, shipping freight rates for transporting containers from ports in Asia to Northern Europe dropped 22.8 per cent to $400 per 20-foot container (TEU) in the week ended last Friday, data from the Shanghai Containerized Freight Index showed.

Freight rates on the world’s busiest shipping route have tanked this year due to overcapacity in available vessels and sluggish demand for transported goods. Rates generally deemed profitable for shipping companies on the route are at about US$800-US$1,000 per TEU. In other words, at current prices shippers are losing half a dollar on every booked contractual dollar at current rates.

According to Shanghai data, it was the third consecutive week of falling freight rates on the world’s busiest route. Container freight rates have so far increased in 5 weeks this year but fallen in 23 weeks.

In the week to Friday, container freight rates fell 24 percent from Asia to ports in the Mediterranean, fell 4.4 per cent to ports on the US West Coast and were down 3.7 per cent to ports on the US East Coast.

Maersk Line, the global market leader with more than 600 vessels and part of Danish oil and shipping group AP Moller-Maersk, was one of the few container shipping companies to make a profit last year. The company controls around one fifth of all transported containers from Asia to Europe.

Should the dead cat bounce in shipping rates indeed be over, and if the accelerate slide continues at the current pace, not only will shippers mothball key transit lanes, but the biggest concern for global economy, the unprecedented slowdown in world trade volumes,which we flagged a week ago, will be not only confirmed but is likely to unleash yet another global recession.

Unless, of course, central planners learn how to print trade and quite soon at that...

Fed Staff Accidentally Posts Bearish Economic Forecast and Prediction Inflation Would Not Hit 2% by 2020; Upset Over Leaks? Why?

Global Economic Analyisis,

2 August, 2015

The Fed created quite a stir by inadvertently posting documents on its website. The documents revealed some expected things, as well as a few startling (but not to Mish readers) projections.

Please consider Fed Inadvertently Publishes Staff Forecast for 2015 Rate Hike. 

 Staff economists at the Federal Reserve expect a quarter-point U.S. interest rate increase this year, according to forecasts the Fed mistakenly published on its website in a gaffe that drew criticism about its ability to keep secrets.

Federal prosecutors are currently probing an alleged leak at the Fed of market-sensitive information to a private financial newsletter in 2012.

"It regrettably appears once again that proper internal controls are not in place to safeguard confidential Federal Reserve information," said Representative Jeb Hensarling of Texas, a Republican who chairs the House Financial Services Committee and is pressing Fed Chair Janet Yellen for documents regarding the 2012 leak.

The Fed said in a statement that the forecasts were "inadvertently" included in a computer file posted to its website on June 29.

Fed officials said the disclosure was due to procedural errors at a staff level and that the mistake was discovered on Tuesday this week. The matter has been referred to the Fed's inspector general.

"It is baffling that these leaks continue to occur," said Congressman Randy Neugebauer, a Texas Republican who chairs the House subcommittee on financial institutions and consumer credit.

Unintentional Projections 

1. One hike in 2015: The staff expected policymakers would raise their benchmark interest rate, known as the Fed funds rate, enough for it to average 0.35 percent in the fourth quarter of 2015. That implies one quarter-point hike this year, as the Fed funds rate is currently hovering around 0.13 percent.
2. Inflation: the staff did not expect inflation to ever reach the Fed's 2.0 percent target. By the fourth quarter of 2020, they saw the PCE (personal consumption expenditure) inflation index rising 1.97 percent from a year earlier.
3. Growth: The Fed's staff also took a dimmer view of long-run economic growth, expecting gross domestic product to expand 1.73 percent in the year through the fourth quarter of 2020. The views of Fed policymakers for long-term growth range from 1.8 percent to 2.5 percent.

Upset Over Leaks - Why?

Congress is upset over leaks. Is that what people should really be upset over?

Why? We should be happy to have a glimpse of what this secret sect thinks, discusses, and wants to hide vs. the spoon-fed crap they want us to hear.


What To Be Upset Over

• I propose people should be upset at a group of clowns who actually believe they can steer the economy like a truck, when it's obvious they cannot. 
• We should also be upset because the documents suggest that Fed official statements are nothing but souped-up nonsense to appease the financial markets and Fed egos about what they don't know but pretend to. 

History Lesson

History proves that the Fed produces bubbles and busts of increasing amplitude over time, to the detriment of the middle class.

Indeed, the Fed, along with public unions and corrupt politicians are the very sponsors of the income inequality that Janet Yellen, the unions, and politicians rail against.

It's amusing what the Fed staffers came up with. Fed officials say it's not what they believe. Does the denial ring true? Not to me. But it doesn't really matter. 

The fact of the matter is the Fed and central banks in general have no idea where interest rates should be, what the money supply should be, what unemployment should be, how many cars should be produced, how many houses should be built, or what the price of assets should be.

A group of clowns sitting in a room cannot possibly decide these things. And in attempting to do so, they send out all sorts of false economic signals about demand, creating bubbles in the wake. The housing boom-bust is a perfect example. Right up until the housing bust, it actually appeared as if there was a housing shortage. The same thing happened outside the US.

Increasing Interference

Central banks worldwide have long distorted markets with government bond price manipulation.

Now, central banks in Asia and Europe stretched the bounds by investing in corporate bonds and equities.

We can say for certain these preposterous manipulative efforts will blow sky high. What we cannot state is when. Nor can we say how much additional damage these central bank manipulators cause in the meantime.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com