Jackson Jambalaya

Still wondering how this financial meltdown occurred? Read this article by Bloomberg, probably the best one written by a major media outlet so far. The off-balance sheet assets and liabilities are what drives this crisis as balance sheets are not trusted anymore by financial institutions.

Bloomberg:
"The bankers were warned that a Financial Accounting Standards Board plan would force trillions of dollars back onto balance sheets, requiring cash reserves to soar. Their business of pooling and reselling assets had dropped 47 percent in the first six months of the year, and the industry couldn't afford another setback. (Never mind this accounting trick is what caused the meltdown in the first place.-KF)....
Efforts by lobbyists have delayed FASB decisions and kept key parts of the American financial system beyond the reach of regulators. Their victories included ensuring that over-the- counter derivatives stayed unregulated and persuading the Securities and Exchange Commission to let investment banks' broker-dealer units reduce capital requirements. That allowed them to increase borrowing and magnify profits. Bank watchdogs also didn't move to tighten mortgage-industry standards until after the collapse of the subprime market.
Today, a road snakes from the foreclosed homes of California and Ohio to the capital cities of Europe, where politicians and bankers have struggled to contain a widening credit crisis by pumping hundreds of billions of euros into the financial system. The road was paved with decisions like ones by FASB that allowed banks to keep shifting assets into blind spots outside the view of shareholders and industry overseers. (Remember KF telling you it was about the transparency, not the liquidity or interest rates?)

Think it was all Bush's fault because the SEC changed the leveraging limits in 2004 for investment banks (limit of 12:1 was removed completely)?
"That same year (1998) Greenspan, Treasury Secretary Robert Rubin and SEC Chairman Arthur Levitt opposed an attempt by Brooksley Born, head of the Commodity Futures Trading Commission, to study regulating over-the-counter derivatives. In 2000, Congress passed a law keeping them unregulated...." That started the ticking of the time bomb.
http://www.bloomberg.com/apps/news?pid=20601170&refer=home&sid=aYJZOB_gZi0I


By the way, it should be asked if Citi is insolvent:
"Citigroup Inc. reported that it had $1.18 trillion in off- balance-sheet holdings as of June 30, including $828.3 billion in qualified special purpose entities, or QSPEs, a type of trust that is supposed to be beyond a lender's control."

What do you think will happen if a large portion of Citi's off-balance sheet asses are garbage?

Note:
Leverage: the ratio of borrowed funds to each dollar of equity capital held.

Financial Times chirps up about the crisis in international shipping:
"While the BDI has been dropping for months, the real collapse took place from the week after the Lehman bankruptcy. From a level of 4949 then, the BDI had, by last week, come down to 1149, for a decline over about a month of 76 per cent. This doesn't represent some piece of high-concept securitised paper meeting its maker in front of a judge; this is the real world of physical assets being employed to do actual work.....
It all goes back to that Lehman bankruptcy. Among the more serious casualties of that colossal failure of leadership was the letter of credit business. There is nothing more vanilla than the l/c for an international shipment. One bank tells another bank that it will accept the credit risk of an individual importer or exporter. They document that, with forms that have been around forever, clerks and computers shuffle the paper around. A fee is charged and goods are released for shipping, inspection, and delivery. The most boring business in the world. Until it stops.
After Lehman those clerks, and their computers, stopped trusting the clerks and computers at other banks. Treasury secretary Hank Paulson's ignorant and clumsy attempt to avoid moral hazard and systemic risk resulted in uncounted quantities of goods piling up on loading docks, and customers living off inventories and consuming less.
No, I don't think the Lehman leadership, or the shareholders who went along with them, deserved to be saved. It was not, however, necessary to sacrifice the worldwide flow of goods and credit to make them an example.
The government and banking leaders might think that those clerks and computers will have been reassured by the business cable channels telling them that things will be fine. Well, it hasn't happened yet.
Some critical institutions were caught in the middle of this. Wachovia, as I mentioned last week, did a lot of letters of credit for the Latin American trade. Royal Bank of Scotland has huge exposure to shipping. The line people working on trade finance need to be told that it is okay for them to take these risks, that they won't be laid off if they make one good-faith mistake...
http://www.ft.com/cms/s/0/03ff3bb4-a48e-11dd-8104-000077b07658.html

Still think that Bailout Bill should have been passed? Markets plunged how many points since it was signed into law? The government nationalized the banks. The housing market slows even more. Yet that is not even the worst part. International trade freezing up is what causes depressions. THIS is what has everyone in finance and government spooked.

Earlier posts on international trade crisis:
http://kingfish1935.blogspot.com/search?q=letters+of+credit
http://kingfish1935.blogspot.com/2008/10/update-on-trade-slowdown.html
http://kingfish1935.blogspot.com/2008/10/bloomberg-letters-of-credit-frozen.html
http://kingfish1935.blogspot.com/2008/10/more-news-about-grain-piling-up-in.html
http://kingfish1935.blogspot.com/2008/10/international-trade-shutting-down.html

"In short there is absolutely nothing in the past history of the market to support a "bottom" call here. Remember that CNBC's mouth-breathers along with virtually every commentator called a bottom in March and then again in July. How has that worked out?
Is it possible we have bottomed here? Sure. Anything is possible. I could win the lotto this coming weekend, if I buy a ticket.
But hope is not an investment strategy and there is a difference between trading a bear market rally (and, if we have in fact finished (III) down, we're due for one that might last a couple of months) and investing for the long term.
If this bear is not over, then the 13/34 EMA and 20/50 SMA (on a weekly chart) will not cross back over. If you are a conservative investor you should have gone to cash in December of 2007 at the latest.
If you did not and are now paying attention to the bottom callers you are engaged in "investment by prayer", which is a horrible strategy and has been the ruin of many people in the market.
If you did go to cash back in 2007 based on a long-term timing signal and are now engaged in going back into the market "long", one has to ask - why would you be doing that when those same long-term timing signals are in fact still diverging - that is, showing deteriorating rather than improving conditions?
Finally, analyze your investment thesis based on what you think the economy is going to do. If you can come up with a cogent belief that the economy - the consumer portion of the economy - will in fact turn around by June of 2009, then you have an argument for trying to scale into investment positions for the long haul at this time.
Personally, I don't see it. ..............."
http://market-ticker.denninger.net/

"Let's start with AIG: $122 billion may not be enough.
Why? Because the CDS they wrote keep going down in value and forcing margin calls for more collateral (money).....
Now let's talk banks. You know, those things that are supposed to hold reserves against deposits when they make loans? Well guess what - there are no reserves. The non-borrowed reserves have been negative for months - since the turn of the year, in fact, and now total over $300 billion dollars.
What does this mean? Simple - the banks lost (blew, speculated with and got caught on the wrong side of, issued or purchased crap securities with, paid bonuses with, paid the light bill with, etc) the reserves they are supposed to hold against deposits. This would usually result in them being declared insolvent and the FDIC would seize them, but that would be inconvenient. So instead they went to The Fed which loaned them reserves so it appears they have some. It appears they have subsequently lost some of that money as well, because the "non-borrowed" reserve number continues to increase in the negative direction (that is, it's a negative number - a very large negative number.)..."
http://market-ticker.denninger.net/archives/P3.html

Keep Reading.

Denninger writes with acid yet again, cutting through the BS, telling Americans some things the media and politicians are not willing to say:
"today we learned that The Fed has lost control of the Effective Fed Funds Rate - their own overnight lending rate. They were forced to change their interest rate on reserves in order to try to get it back under control - and there is no reason to believe their efforts will be effective.....
Treasury will have to issue three trillion dollars of new debt over the next 12 months in an attempt to make this work. But Treasury has been using very short-term debt - mostly four week and 13 week "bills", to fund the existing debt, because they are cheaper. As such the total amount of these auctions could easily reach five trillion dollars over the next 12 months.
Already, Treasury is issuing more than $100 billion dollars in this debt a week, on average, including new issues and rollovers. This is about double the total amount of debt that foreigners (or US interests) hold in total, and we have barely begun to actually issue the debt necessary to make the "TARP" operate.
We are, in effect, borrowing to pay interest. If you have ever tried to do this personally, you know that doing so almost always leads to bankruptcy......
I believe Treasury has been attempting to "kick the can down the road" as is the usual pattern in Washington DC.
Unfortunately the can has filled up with cement and there is now a very high probability that instead of the can being able to be kicked down the road until next year after the elections the second-level dislocation - the "big one" - is going to happen within days. ..."
http://market-ticker.org/archives/623-The-Stark-Choice-Now-Facing-America.html
Someone made a snarky comment last week about my posting Denninger's columns on a regular basis. I am doing so for several reasons. I think he has a very valid point of view which needs to be considered. The media has consistently gotten this whole story wrong and the debate over the Bailout proved most politicians either don't care about this problem or if they do, it's too complex for most of them to understand. I think the two institutions, the media and our political leadership, have consistently failed the American people. If you read Mr. Denninger's predictions for 2008 nearly a year ago, he completely nailed everything that's happened in the markets and economy this year. He was also one of the few people who read the Bailout Bill. As I read it, I was able to confirm his analysis and everything he said would happen after it was passed took place. When it comes to the issue of the transparency of balance sheets, he is one of the few voices bringing it up as Bernanke and Paulson try to fight a forest fire with a garden hose. Keep reading his posts, you'll learn more from him than from the hacks or money honeys.

The media continues to wake up to the developing crisis in international trade. Yahoo News (Singapore) reports:
"There is growing evidence the global credit crisis is stifling seaborne trade as banks become more reluctant to honour crucial letters of credit between buyers and sellers who ship goods and resources, analysts say.
"With reports of sellers' banks deciding they don't trust the financial institutions named in buyers' letters of credit, have come alarming anecdotes of cargo ships being stuck in home ports," Matt Robinson, an economist at Moody's Economy.com, said.
"With ships not moving, stocks have been piling up and exporters have grown desperate for income from idle inventory," Sydney-based Robinson said in a report published on Wednesday.....
Robinson said if the crisis worsened ordinary consumers could be hit as more importers feel the pinch.
"This could lead to price distortions as demand, despite being subdued by slowing economic conditions, outstrips supply as shipments are delayed," he said.
"Consumers also face potential supply shortages as shipments of foodstuffs and grain lay stranded overseas," Robinson said." http://sg.news.yahoo.com/rtrs/20081023/tbs-shipping-credit-trade-7318940.html

Earlier posts on this subject:
Update on Trade Slowdown
Bloomberg: Letters of Credit Frozen
Time to Wake Up
More News About Grain Piling Up in Ports
International Trade Shutting Down?

Good morning boys and girls. Before we take our naps today, we are going to learn about "The TED Spread". Do you know what the TED Spread is? The TED Spread is "the difference between the interest rates on interbank loans and short-term U.S. government debt ("T-bills")."

Do you understand what this means? You compare the interest rates between the three-month T-Bill rate and the three-month LIBOR rate. A small TED Spread is good, a large TED Spread is bad. We don't like big TED Spreads. They are mean and hide under the bed waiting to eat little children. Big TEDs give nightmares to rich people everywhere. We try to make them go away.

The Gospel of TED Spreads according to St. Wiki states "The TED spread is an indicator of perceived credit risk in the general economy. This is because T-bills are considered risk-free while LIBOR reflects the credit risk of lending to commercial banks. When the TED spread increases, that is a sign that lenders believe the risk of default on interbank loans (also known as counterparty risk) is increasing. Interbank lenders therefore demand a higher rate of interest, or accept lower returns on safe investments such as T-bills. When the risk of bank defaults is considered to be decreasing, the TED spread decreases.." http://en.wikipedia.org/wiki/TED_Spread

There is even a pretty color chart to help you understand the TED Spread. You can see it on this little website in Halloween colors: http://www.bloomberg.com/apps/cbuilder?.ticker1=.TEDSP%3AIND

Now line up for the bathroom, then unroll your nap pads, get your blankie and lie down. This will be a long nap.

Can't say he didn't warn us.

Just wait until you see what will come next.
"If you're playing "Buffett", following his claim (note: there is no penalty for lying on national television about what you're doing in your personal account) that he's buying here, there is a little ugly fact you need to be aware of.
That fact is treasury issuance.
See, to fund all this crap that Congress, Paulson and Bernanke have in the pipe (you know, the TARP, the newly-minted SIV that Ben announced this morning to buy commercial paper, etc) the treasury issue requirements will be north of three trillion dollars in this fiscal year.
Oh, and that's before Obama wins (and he will) and promises another $1 trillion worth of new spending without a nickel's worth of ability to fund it.......
what's nasty here is that right now we're seeing a flight INTO longer-term bonds (the 10 in particular), which means the market is anticipating another stock panic, and with good reason....
Bernanke is doing what Paulson tried and failed at in the "free" (coerced by arm-twisting by Paulson) market through executive fiat, and he is printing money to fund it. Exactly how much money he is printing (as opposed to lending) depends on the precise amount of overpayment that is being induced through these so-called "loans", but that it is happening is not open to question.
Why has this become necessary?
Ben and Hank produced a dislocation in this section of the marketplace by favoring other debt instruments with federal guarantees, thereby forcing money out of these instruments.
This in turn created major problems for money market funds who buy this paper as a routine matter of course in that when they needed to redeem deposits they suddenly found no buyers for the securities, as those people had fled to other instruments that Ben had guaranteed payment on!
As each new facility is rolled out by Ben and Hank a new area of debt becomes backstopped by the government in some fashion, thereby forcing money out of other instruments and causing those instruments to become distressed!
We are rapidly reaching the point where only The Fed and Treasury are providing any lending at all!........"
The Market Ticker: Fiscal Category 5 Warning

Mr. Denninger keeps asking questions regarding the financial crisis completely missed by the media. He is not some conspiracy theorist or a genius. He simply reads what is published and asks questions, something our money honeys seem unable to do as they blather about the rise and fall of the Dow Empire. He coins a new word in this post, fraudacity, as he discusses the phoniness of the Bacardi Bailout:
"John Mack yesterday in a CNBC interview said that the capital deployed by Treasury into the banks was going to rebuild their capital ratios - not be lent out. In other words, they intend to hoard it.
CNBC's Fast Money finally started talking about the outright fraud and lies last night. Dylan Ratigan was absolutely on fire about the fact that Paulson was in fact one of the executives lobbying hard for removal of leverage limits in 2004, just two years before he took the position at Treasury (and cashed out $500 million in Goldman Sachs stock tax free.)
I and a few others have been peppering the media with this, and finally, someone woke up to the fact that the very same people who made this mess now want we the taxpayers to pay for cleaning it up - after they ran off with all your money!.....
Nor does it stop there....."

Fraudacity Story

Anna Schwartz tells The Wall Street Journal that Bernanke is using the wrong tools to solve this problem. The hapless Fed Chairman defends his Maginot Line of Liquidity while the CDO Panzers outflank him through the forest of overleveraged balance sheets. Who is Ms. Schwartz? She is 92 years old and lived through the Great Depression. She co-authored with Milton Friedman "A Monetary History of the United States" in 1963, the leading treatise on how monetary policy "turned the stock market crash into the Great Depression". Since 1941, she has worked at National Bureau of Economic Research in New York. Her thoughts on the current crisis should be taken very seriously. Regular Readers of this blog will find her remarks sound very familiar.

"Ms. Schwartz thinks that our central bankers and our Treasury Department are getting it wrong again.
To understand why, one first has to understand the nature of the current "credit market disturbance," as Ms. Schwartz delicately calls it. We now hear almost every day that banks will not lend to each other, or will do so only at punitive interest rates. Credit spreads -- the difference between what it costs the government to borrow and what private-sector borrowers must pay -- are at historic highs.
This is not due to a lack of money available to lend, Ms. Schwartz says, but to a lack of faith in the ability of borrowers to repay their debts. "The Fed," she argues, "has gone about as if the problem is a shortage of liquidity. That is not the basic problem. The basic problem for the markets is that [uncertainty] that the balance sheets of financial firms are credible."
So even though the Fed has flooded the credit markets with cash, spreads haven't budged because banks don't know who is still solvent and who is not. This uncertainty, says Ms. Schwartz, is "the basic problem in the credit market. Lending freezes up when lenders are uncertain that would-be borrowers have the resources to repay them. So to assume that the whole problem is inadequate liquidity bypasses the real issue.".....
Today, the banks have a problem on the asset side of their ledgers -- "all these exotic securities that the market does not know how to value."
"Why are they 'toxic'?" Ms. Schwartz asks. "They're toxic because you cannot sell them, you don't know what they're worth, your balance sheet is not credible and the whole market freezes up. We don't know whom to lend to because we don't know who is sound. So if you could get rid of them, that would be an improvement." The only way to "get rid of them" is to sell them, which is why Ms. Schwartz thought that Treasury Secretary Hank Paulson's original proposal to buy these assets from the banks was "a step in the right direction."
The problem with that idea was, and is, how to price "toxic" assets that nobody wants. And lurking beneath that problem is another, stickier problem: If they are priced at current market levels, selling them would be a recipe for instant insolvency at many institutions......
Today's crisis isn't a replay of the problem in the 1930s, but our central bankers have responded by using the tools they should have used then. They are fighting the last war. The result, she argues, has been failure. "I don't see that they've achieved what they should have been trying to achieve. So my verdict on this present Fed leadership is that they have not really done their job." http://online.wsj.com/article/SB122428279231046053.html

This is what Karl Denninger has been preaching on The Market Ticker and what he said on Kim Wade's show Monday. Most of the financial reporters don't have a clue or are using the wrong paradigm to analyze this problem. Its not liquidity, its not interest rates, its not the bailout and recapitalization. Its the transparency that is key. The freezing up of international shipping is merely a symptom although its a very serious one. The Fed and Treasury ostriches refuse to acknowledge they might have made a mistake in ignoring this issue. As Ms. Schwartz and others have stated, the problem is these CDO's were private deals and too often were kept off the balance sheets yet can very easily sink a company. Until these are acknowledged and valued properly (and how do you void mark to market if they were grossly overvalued in the first place?), banks will not lend to each other and the credit markets will stay frozen.

Probably the single largest factor that caused the market meltdown was the 2004 SEC rule change that removed leverage limits. The New York Times reported:
"On that bright spring afternoon, the five members of the Securities and Exchange Commission met in a basement hearing room to consider an urgent plea by the big investment banks.
They wanted an exemption for their brokerage units from an old regulation that limited the amount of debt they could take on. The exemption would unshackle billions of dollars held in reserve as a cushion against losses on their investments. Those funds could then flow up to the parent company, enabling it to invest in the fast-growing but opaque world of mortgage-backed securities; credit derivatives, a form of insurance for bond holders; and other exotic instruments. ......
Over the following months and years, each of the firms would take advantage of the looser rules. At Bear Stearns, the leverage ratio — a measurement of how much the firm was borrowing compared to its total assets — rose sharply, to 33 to 1. In other words, for every dollar in equity, it had $33 of debt. The ratios at the other firms also rose significantly. ...... "(Kingfish note: The limit had been 12:1 before the SEC action) http://www.nytimes.com/2008/10/03/business/03sec.html?pagewanted=1&_r=1

Want to guess who spearheaded the effort by the investment banks to get the SEC to change the rules? "The five investment banks led the charge, including Goldman Sachs, which was headed by Henry M. Paulson Jr. Two years later, he left to become Treasury secretary. "

Anyone questioning the leadership of the Treasury Department as it bailed out Bear Stearns, AIG, Fannie Mae, Freddie Mac, the nine largest banks while each time promising that particular step would solve the crisis as the SAME leadership caused this debacle to happen in the first place in the private sector. Skeptical? Ask Secretary Paulson when he is going to force the banks and other financial institutions to put these CDO's and other off-balance sheet assets or losses on their balance sheets so we can finally have an accurate picture of our financial health? Why does he insist on throwing money at the problem while avoiding the issue of transparency? Sixty Minutes recently reported the credit default swap market could be as large as $60 TRILLION dollars but no one knows for sure because they are not regulated or registered, yet we are assured by the Secretary and Federal Reserve Chairman that spending $700 billion on the banks will fix the problem.

Tic..tic..tic.. that is the sound of invisible off-sheet swaps and balance sheets waiting to explode.

FINALLY some of the American media is beginning to wake up to the shutting down of international shipping. Kingfish has been warning you about this little-known disaster in the making while the media has been asleep at the wheel. Bloomberg reports:

"Oct. 15 (Bloomberg) -- Commodity shipping rates plunged to the lowest in more than five years as a lack of trade finance left cargoes stranded and the global economic slowdown limited raw material demand.
Traders are finding it harder to get letters of credit that guarantee payments for goods, shipping executives said. Together with a slowdown in trade, that has contributed to this year's 82 percent drop in shipping costs for grain, coal and other commodities. Rates are so low that Zodiac Maritime Agencies Ltd., the line managed by Israel's billionaire Ofer family, announced today it may idle 20 of its largest ships.
``Letters of credit and the credit lines for trade currently are frozen,'' Khalid Hashim, managing director of Precious Shipping Pcl, Thailand's second-largest shipping company, said in Singapore yesterday. ``Nothing is moving because the trader doesn't want to take the risk of putting cargo on the boat and finding that nobody can pay.''
The Baltic Dry Index fell 11 percent today to 1,615, the lowest since February 2003. Rates for larger ships of the type Zodiac intends to idle fell 17 percent today, taking this year's plunge to 85 percent, according to the London-based Baltic Exchange.
Banks are leery of financing commodities and shipping transactions. Rio Tinto Group, the world's second-largest aluminum producer, may delay the planned sale of $10 billion of assets and Sterlite Industries (India) Ltd. shelved its $2.6 billion purchase of Asarco LLC. Ship owners can't find cash to finance the construction of new ships...."
http://www.bloomberg.com/apps/news?pid=20601087&sid=alFFUQ8a.WZM&refer=home

Naked Capitalism posted some more information on the slide of the BDI. There are also some good comments at the end of the story. http://www.nakedcapitalism.com/2008/10/baltic-dry-index-falls-nearly-20-in-two.html?showComment=1224057420000

If I had to make a completely uneducated guess, I think this is an example of what completely spooked Bernanke and Paulson into injecting $250 billion into the banks instead of first buying the bad paper. They see the wholesale rejection of letters of credit and trade credit by shippers, causing a depression and other crisis's if allowed to worsen. If the trade credit implodes, then we are facing a real economic disaster.

Earlier posts on this subject:

Time to Wake Up
More News about Grain Piling Up in Port
International Trade Shutting Down?

Another story about credit crunch affecting shipping. International trade is slowing down. Think this is some arcane subject that doesn't affect the average American? Think of all the goods that come from overseas. Oil. Metals. Food. Textiles. What is going to happen if this continues for more than another month? This is the stuff that really causes an economy to contract. Unfortunately, these stories are reported in the Canadian media while ignored by the money honeys. When are they going to start doing their jobs?

Foreign Policy's blog writes:
"Still think the global credit crunch is all about the TED spread and collateralized debt obligations? Think harder. Export-bound grain has started piling up in Canada as sellers have begun refusing to trust the credit lines and financial institutions linked to their foreign buyers.
The problem is that Canada's export cargoes don't get loaded until buyers can prove their ability to pay -- proof that has been increasingly hard to come by in the wake of bank defaults and shrinking credit markets worldwide. Unable to get credit lines, many buyers have left the grain market, generating big losses for Canadian shippers. Add to this the greater costs that shippers now shoulder because of delayed payments, and the picture starts looking pretty bleak.
And Canada isn't the only country suffering from the crunch. U.S. and South American shippers are taking even harder hits. Los Angeles and Long Beach -- home to two of the biggest ports in the United States -- have already seen a 9 percent drop in imports this year. Global shipping rates are down 74 percent from last May.
With 90 percent of the world's trade in goods going by ship, credit access is key to trade's survival. It's also key to investment in product development, which surely will fall as manufacturers face greater declines in profits. ..." http://blog.foreignpolicy.com/node/10010

The Financial Post on October 10 reported:
"The fall in commodity prices is being exacerbated as international buyers delay or even back out of purchases in the hope that the market will go still lower.......
While the retreat of buyers from the market is a key contributor to the price free fall, industry insiders say some purchasers are backing out of deals at the last minute, leaving piles of unsold grain, coal and other raw materials backed up at ports in the United States and Canada....
Speaking in an interview earlier this week, Mr. Temple said the phenomenon is happening mostly at U. S. and South American ports but is starting to appear in Canada.
While declining global demand is a factor in commodity prices, the biggest driver is the credit crisis. Thanks to the near-evaporation of credit, even willing buyers have been unable to step up to the plate.
Banks have ceased to trust one another and letters of credit backed by once-revered global banks no longer carry weight.
According to Mr. Jensen, some companies have managed to get around the problem by using alternative financing but in some areas trade has dried up completely.
A spokesman for Export Development Canada declined to comment....."
http://www.financialpost.com/story.html?id=871673

Still don't believe The Kingfish? Reportonbusiness.com confirms such stories:
"At Port Metro Vancouver, the country's largest port, the early impact of the credit crisis is being seen. With traditional lines of credit drying up, some bulk cargo such as grain is stuck because buyers' proof of payment isn't considered adequate...."
http://www.theglobeandmail.com/servlet/story/LAC.20081010.RBANKSBC10/TPStory/Business

A quick check of the Baltic Dry Index (See chart above), a leading indicator of shipping prices and volume, shows the Index has plunged since early September (52% decrease. The Baltic Exchange describes the Index as "an assessment of the price of moving the major raw materials by sea. Taking in 26 shipping routes measured on a timecharter and voyage basis, the index covers Supramax, Panamax, and Capesize dry bulk carriers carrying a range of commodities including coal, iron ore and grain."). The Index confirms in part the reports on the grain piling up in ports as international trade slows down due to the credit crunch. Keep in mind the freezing up of international trade (due to the Smoot-Hawley Act jacking up tariffs to 60%) was one of the leading causes of The Great Depression. Same problem, hopefully a different result. People need to start demanding more answers from our leaders as well as the media.