Thanks for following up on this. I too am trying to find out more about this as the consequences of a trade breakdown would be devastating.

Having tried to gather data on the subject of letters of credit (or lack of) for about 6 weeks now I find little or non first hand data that would support these concerns. Where are the photos of containers stacked up in ports, where are the statements by grain exporters failing to find buyers?

Could all this be much ado about nothing?

Thanks

William

Anonymous said…
“Obama was voted for change, but he made a move last week, which supports analysis below.

War on iran/proxies coming in next few weeks!”

Ahem, sir I think you should consider if the “change” is from “The Uncle Tom’s Cabin”
to “The Uncle Tom’s… Kibbutz”

War on iran/proxies coming in next few weeks!

Details below

http://www.marketwarnings.com/2008/11/is-attack-on-iran-syria-coming-soon.html

Until shippers either start going bankrupt or renegotiate the debt on their ships, expect more of the same.

There are those who argue that importers of bulk goods, grains, ores, and coal are running down inventories rather than buying goods which will only be cheaper tomorrow. There is a question what happens when the inventories need to be replaced. The US is among the affected exporters in this kind of case along with Brazil and Australia etc, but letters of credit have dried up for the financing of these kinds of activities.

Chinese trading companies on the other hand are said to be maintaining lists of financial institutions whose letters of credit they will not any longer accept.

AS in other kinds of financial “services” much of the broking involved in financing trade, leasing ships, insuring cargoes, runs through London, where, presumably, some part of the world’s $14 trillion bill for trade in goods is integrated with currency, interest rate and other kinds of speculative activities.

I wonder if others have given any thought to the questions involved in this matter of trade financing, such as the time frame for more general economic consequences, the spin-off effect on already stressed financial markets and the derivative casino, the relation to the Libor and other money market interest rate questions which have generated such concern. The possible significance of China and others not accepting bank letters, as well as banks not issuing them.

Oh, and the oil business: is the same phnenomenon observed in the case of oil? Do the majors have such a stranglehold as to be immune from trade financing and tanker leasing problems? Could oil importing countries be looking at the same kind of problems in say 60 to 90 days as importers of other primary materials are?

Is the result of this both economic dislocation and higher prices as inventories are run down?

Any views?

Still waiting to see the recycling of older ships, their owners can’t hold off forever. It’s a good time to retire, why fight it

The rest will be consolidated