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Shipping Meltdown! (or not?)

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Santa Claus isn’t coming this year! Global shipping has collapsed! Big ships are stranded as the companies can’t even pay the docking fees!

Clearly, it’s time to panic. The bankruptcy of Hanjin shipping has created a wave of horrifically bad stories predicting the end of international trade as we know it. Recession must be just around the corner as the global system collapses, right?

Um, no. Not even close. The story we have been told is a good example of two key features of financial reporting today. The first is that no one has the slightest idea what they are talking about and the story is completely free of the context anyone might need to understand it. The second is that the only big news is bad news – probably in part due to the first problem.

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Ready to Panic?

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What does it take for international markets to panic?  With the debt ceiling due to be hit in a little more than a week, the short answer is that the “full faith and credit of the United States” is still worth quite a lot.   We’re only starting to see the first signs of a panic as an auction of 1-month TBills sold at a net rate of 0.355%.  If that doesn’t impress you, it’s worth noting that it was one third that a week ago.

Stocks started falling, too, with the DJIA losing just over a percent.

Allright, it’s not much.  Gold isn’t budging above $1330 or so per ounce and benchmark 10yr TBills are still comfy at 2.64%.  These are probably the best standards to watch for signs of panic as the stalemate goes nowhere.

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Austerity Goes Down

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How’s that austerity workin’ for ya?  Just as sequestration takes hold here in the US, Europe is looking to go the other way, releasing more Euros (and even Pounds) in order to get things going again.  The new US “policy” of budget balancing, backed into without thinking, is now being formally abandoned by everyone else.

There is probably some kind of requirement that any blog on economics has to write about Europe every so often, even if nothing new is happening.  But today there may well be something worth writing about as the Central Banks develop the whiff of panic that has been absent so far.   As Japan becomes more urgent and the US shoots itself, Europe has some tough choices to make.  What, or better yet can, they do?

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