(Roughly) Daily

Still, those crises do take tangible form…

Q3 is a traditional peak season in the world of shipping, but not this year. Global inflation, weakened consumer demand and excess cargo carrying capacity are pushing the market down…

With a gloomy economic outlook and vague alarms from central banks, it seems recession could be just around the corner.

Are there any indications from the shipping market when global recession is on its way? This is a question not only of interest to the commercial and technical players in the maritime industry, but also to financiers and policy makers.

The last recession triggered by economic factors was the Great Recession from December 2007 to June 2009. Goods loaded worldwide for seaborne trade fell by nearly five percent in 2009 compared to 2008, from about 8.23 billion tons to 7.82, according to UNCTAD’s Handbook of Statistics 2021.

Is a depressed shipping market a contributor to global recession, or does global recession lead the shipping market down? It is a chicken and egg question. But can the Great Recession’s impact to shipping market provide some useful reference to the current situation? Shipping indexes may shed some light.

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How is the shipping market now? In May 2022, bulker earnings started to drop. Tankers were at a short break in an upward rise. Container freight rates were flat and just about to begin sliding. As of September 2022, only tankers’ earnings are still climbing.

The bulk shipping market’s underperformance will probably continue and will not turn before Christmas, unless there are significant changes – for example, if an easing of COVID restrictions in China pushes up its industrial demand (particularly for iron ore). Demand for oil and gas from the West will help send tanker rates continue soaring. Container shipping is expected to decline in the short term.

During the past months, a black cloud has appeared on the global shipping market’s horizon. The downward trend of shipping indexes brings a sense of foreboding. As to the question, “is a global recession imminent?” Most likely, say signals from these two shipping indexes…

“Do Shipping Indexes Hint at Global Recession?,” from @Mar_Ex. (TotH to friend PH.)

See also: “China lockdowns accelerate supply chain diversion and box shipping review,” and more generally, “An often-overlooked economic measure is signaling serious trouble ahead” and “Three Harbingers Point to a U.S. Recession.”

* John Stuart Mill

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As we batten the hatches, we might we might spare a thought for Henry George; he died on this date in 1897.  A writer, politician and political economist, George is best remembered for Progress and Poverty, published in 1879, which treats inequality and the cyclic nature of industrialized economies, and proposes the use of a land value tax (AKA a “single tax” on real estate) as a remedy– an economic philosophy known as Georgism, the main tenet of which is that, while individuals should own what they create, everything found in nature, most importantly the value of land, belongs equally to all mankind.

George’s ideas were widely-discussed in his time and into the early 20th century, and admired by thinkers like Alfred Russel Wallace, Jose Marti, and William Jennings Bryan; Franklin D. Roosevelt sang his praises, as did George Bernard Shaw.  But with the rise of neoclassical economics, George’s star began to recede.  Still, more modern thinkers like Albert Einstein and martin Luther King were fans.

In a sequence that mimicked George’s arc of influence, it was George’s work that inspired Elizabeth Magie to create The Landlord’s Game in 1904 to demonstrate his theories; ironically, it was Magie’s board game that became in the 1930s (as recently noted here and here) the basis for Monopoly.

In 1977, Joseph Stiglitz showed that under certain conditions, spending by the government on public goods will increase aggregate land rents/returns by the same amount. Stiglitz’s findings were dubbed “the Henry George Theorem,” as they illustrate a situation in which Henry George’s “single tax” is not only efficient, it is the only tax necessary to finance public expenditures.

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