Thanks.

The strain on the Fed has grown as it proliferated "lending facilities" to inject cash into first, commercial banks and thrifts, and then into investment banks, and finally into corporations, money-market mutual funds, commercial paper markets, asset-backed securities markets and mortgage-backed securities markets. After running in the $800-$900 billion range all year, the Fed's balance sheet began to soar in September, the month where we saw a dramatic downturn in the crisis, where Treasury moved to back Fannie Mae and Freddie Mac; Lehman Brothers failed; AIG collapsed under the weight of its credit derivatives obligations; Merrill Lynch sought the dubious safety of a merger into Bank of America; Goldman Sachs and Morgan Stanley became bank holding companies; and Washington Mutual failed, the largest depository institution failure yet. By the end of September, the Fed's balance sheet passed the $1 trillion mark for the first time ever, and in early November passed the $2 trillion mark. Loans outstanding by the Fed have increased from $71 billion when the spigots were first turned on in December 2007, to $1.3 trillion as of last week, and overall, the Fed, the Treasury and the FDIC have committed over $8 trillion in guarantees, equity injections and loans, into the financial system.

It has not been enough, as the pace of the collapse is accelerating and the year-end accounting looms. Banks are facing, even in the extraordinarily lax regulatory framework of today, huge losses for the fourth quarter, but it remains to be seen whether, even with the huge cash injections from Treasury and the Fed, they will be able to admit those losses. Big losses will be scary, but the inability to admit those losses should scare people even more.

This process is clearly not sustainable, as more and more people are beginning to realize. The Fed's attempt to issue debt is a de facto admission of failure–failure of its ability to bail out the system, and the failure of the policy of bailout in general. It is time to admit that & say the system is Dead.

The global economy is melting down, and shipping is way off because trade of finished goods and commodities are way down. Where can one find a conspiracy in this? If every damn ship that sailed had 96 letters of credit from worthy banks it would not cause world trade to suddenly increase. I enjoy connecting dots as much as the next person. There are no dots to connect here.

No one bothers to mention that the BDI climbed to record highs before plunging.

I am trying to add perspective to the BDI movement, not debate how many shipping companies are going under. When commodity prices skyrocketed the BDI rose, when commodity prices fell the BDI fell. I see no phenomena or threat to world trade here. Shipping has always been subject to economic cycles. Check the current hardships of US Trucking Cos. You will find that they are suffering along with air freight and ocean freight.

Let us examine the situation and place it in historical perspective. Mountain over a mole hill. When freight is available to be hauled, ships will haul it…as always.

There was an interesting piece in Bloomberg about UPS offering letters of credit to smaller companies that could no longer get them from traditional sources.

Additionally, DHL has decided to exit NA citing deteriorating economic conditions. FedEx is refusing to give guidance.

I believe the industry insider is still seeing volume because larger the supply chain has much larger lead times. Consumer goods moved by air have a lead time of 3-4 weeks. Industrial goods by surface have lead times of 10 – 15 weeks. Commodities, particularly if bought in future markets can have lead times of 6 months.

In conclusion, I would look towards the air freight as a canary.

“established importers with rock solid balance sheets where the seller’s bank would not accept the L/C from the buyer’s bank”
incoterms basics – when does an exporter look at the importer’s balance sheet?
not with an l/c,where the buyer-cum-importer credit standing is irrelevant

“and these were big international banks, not funky regional ones”
vikram bandit’s shoddybank? – ROFL

The BDI went ballastic during the commodities bubble that recently crashed. The BDI crashed along with commodities…back to it's normal range.

See this link for chart illustrating what I have stated. This is the third time that I have attempted to correct the misconception about BDI. When will someone get it?

Once at the site click to change chart to 'last 15 yrs' and click display.

http://www.findata.co.nz/markets/Quote.aspx?e=INDEX&s=BDI

It does seem like the perfect storm with finance, oversupply of vessels, slowing demand, over speculation by shipowners and a host of other issues.

http://shipchartering.blogspot.com