In the bankruptcy sell offs no one will be in a position (and neither will the market pay reasonable rates for the use of dry bulks, handy, panamax on up) to buy, hold, store and incur interest on the costs of purchasing these ships. And NO ONE will risk cash on floating iron right now. When the liquidations occur, guess where scrap steel prices will go?

Eventually these ships will be worth something again. But that is a long, long ways away.

Guess what these ship builders are going to do in the meantime? Guess what the shipping companies will do? Guess where all the freight brokers will go?

Answer: Davy Jones’ Locker

China has a culture.

It’s different, for instance children are expected to care for their parents.

That kind of thing creates a radically different savings pattern that is culturally determined more than determined by our style of economics with it’s certain presumptions about behavior.

oh well….

But perhaps China could try something more direct, like vouchers to purchase goods, only useable during a limited period of time.

The electrical output decline is really dramatic, even allowing that some industries are power hogs vs output.

China has the inclination to follow Kenyes I believe, and here will be a real test, perhaps even decisive!

That would be something.

Normally free markets would find equilibrium all by themselves but with Governments beginning to interfere with free trade, things only can get worse.

Wealth is not about the amount of money.

But the amount of activities represented by said amount of money.

Your skepticism is well placed. When they say “enough to cover costs”, they don’t mean they will break even and literally cover costs (debt, fuel, crew, etc.)…

What they mean is that it costs them $1000/day (paying for anchor fees, maintenance, etc.) for the ship to be sitting idle in a bay somewhere. Rates were so low before… running the ship would lose the company more than the $1000/day (paying for operation, crew, maintenance, etc. before the cost of the ship is accounted for) because the rates were “below cost”. It was cheaper having the ship doing nothing than to run it. All they are looking for is positive operating cash flow… if they get this, the ship will run.

However, shipping companies are not expecting these costs to cover their debt payments on the ship… so in reality they are still running the ship at a loss…

This is because they have a huge debt burden to cover whether the ship sails or not and if they can get even 10% of it paid for by a customer, it will help the company survive that much longer.

But China is equally guilty of ommission. I mean, what good are China’s reserves if they don’t have a domestic economy? That’s the whole point of trade…use the surplus for the benefit of its own people (social safety nets, healthcare, education, etc) rather than just building a bunch of roads to nowhere.

China is reportedly allocating a mesely $6bn of the $550bn stimulus to — education and healthcare…that is, imo, tantamount to the US dishing out $150bn in the hopes consumers will spend $500 at Target instead of shove it in the bank or pay off credit. Recklessly counterproductive.

As Pettis points out in FT today (see Yves’ links from today):

“A decline in US consumption equal to 5 per cent of US GDP, for example (which is a low estimate), would require an increase in Chinese consumption equal to 17 per cent of Chinese GDP – or a nearly 40 per cent growth in consumption.”

So, as he lays out, China can go two ways: 1.) cultivate a domestic economy or 2.) increase exporting capacity in the hopes that the US, EU, et. al will continue consuming.

Obviously the latter is a road directly to great depression pt 2 and it certainly feels like they are on that road.