Tuesday, November 11, 2014

Pump Up The Jam - 2015

Start of this year, China was showing signs of fatigue and by the year end China openly complained of  aches and tiredness. Whereas Japan, which was already choking, had to be put on a ventilator like US in 2008.

In the second half of this year, commodity prices started deflating due to over supply. Gradually the prices of Iron ore, coal, steel, crude oil, bunkers etc broke down. In an unexpected move, Japan's Central Bank pumped in tonnes of Yen into the local market in bid to stop deflation by fueling demand and lowering Yen in the world market to boost exports. The result of this quantitative easing will be out in time to come but we will surely see a domino effect in Europe. Wilting under a severe slump for past many years, European central banks will soon follow the suite as a last resort measure. The vibes have started emanating as OW Bunkers of Denmark declares bankruptcy. Winter(slump) is here can spring(QE) be far away.

In a regional consolidation, China is launching "Shanghai-Hong Kong stock connect" programme. Also, China, Japan & India are trying to break the ice and form a syndicate in order to survive the long winter.

But for now, slipping demand and growing over-supply spell a bleak future for shipping industry. However, will to print and pump by the various central banks comes as a fresh lease of life for shipping industry and economy in general.

Ben's experiment in USA has rendered QE as an effective recession handling tool but I doubt its universal viability and long term durability. In case of natural resource starving, Japan and Europe, it may not reap the desired results. In the long term, advance technology will work to minimise the use of human resources i.e. cut useful jobs and employment. On the other hand, availability of easy money would turn them into bigger consumers. This double edge sword will eventually turn majority of human population into 'drone bees'.

Matthew 5:5 (fifth verse of the fifth chapter of the Gospel of Matthew in the New Testament) reads:

Blessed are the meek & useless, for they shall inherit the earth.


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