Sunday, December 20, 2015

The Baltic Dry Index Has Just Tumbled To A Record Low

cargo ship wikimediaThe Baltic Dry Index has long been one of the strongest indicators for global economic growth. It's a reliable measure of the world's supply and demand for raw materials, such as concrete, steel, coal, and food. Where this index stands not only gives you a glimpse into how healthy the global economy is, it also tells you how strong economic growth will be in the future. Unfortunately, it's looking worse than ever before.

This week the Baltic Dry Index fell by 4.7%, down to 484 points, which is the lowest level we've seen in 30 years. Or put another way, demand for the raw materials that are the building blocks of the modern world, hasn't been this low since Reagan was president. For the most part, this recent decline can be attributed to China's floundering economy, which was once the largest driver of global economic growth.

But truth be told, this isn't the first time that the Baltic Index has tumbled to a record-breaking low. It has bottomed out several times this year, most notably in January and March. Much like the stock market, it reached an astonishing high point in 2008 before completely collapsing. Unlike the stock market, it has never recovered.

baltic dry index
Contrary to what you hear on the news, the global economy is not recovering. Our politicians and talking heads are like dogs chasing cars. They chase the highs and lows of the boom-bust cycle and inform us accordingly, but they ignore the fact that the economy is getting worse with each cycle. They're missing the bigger picture. The Baltic Dry Index tells us the truth however. We've entered a period of long-term decline that could last for years.


  1. I disagree with this article's summary.

    1. I digress, I agree with this article's summary.