As Bob Herbert stated in The New York Times on April 28th:
“The folks who led the nation to this financial abyss are the ones being made whole on the taxpayers’ dime. We can look after them, all right. But we can’t seem to get credit flowing again; we can’t stanch the terrible flow of home foreclosures; and we’re not doing nearly enough to address the most critical need of all: putting people back to work. While Wall Street is breaking out the Champagne yet again, the rest of the economy is beyond terrible, and will be for the foreseeable future …
“Wall Street can swallow all the Champagne it wants, and the market fanatics can obsess until their brains lock over the daily gyrations of the Dow. The simple fact is that working men and women are being squeezed in the ever-tightening jaws of a catastrophe.”
In what would seem to be entirely unrelated stories on the 28th, Lloyds List offered these observations:
1. “Evergreen Marine Corp. suffered a huge drop in profits last year as freight rates declined.”
2. “To build all the ships now on order would be utter folly. The world will not need most of this additional capacity for years, and many of the shipbuildings that are now coming off the production lines are destined to go straight into lay-up.
“That makes little sense, and it is not too late to halt some of the building work. In a world of diminishing resources, producing great steel hulks that no one wants and letting them rust away in some harbor, fjord or estuary clogged with other mothballed cast-offs is ridiculous.
“Yet how can this threat, which has the potential to leave shipping in the doldrums long after the world starts to recover, be removed? The industry does not have the leadership with the influence or mandate to thrash out a solution … So who should take responsibility for sorting out this mess? … Will government intervention be necessary?”
Lloyds again on the 29th:
1. Greek containership owning company Danaos has delayed the delivery of 15 newbuildings from Chinese and Korean shipbuilders.
“In its quarterly results announcement, Danaos said that it had agreed with China Shipbuilding and Trading to delay the delivery of a quintet of 8,350 TEU vessels by 200 days each on average.
“The company has also agreed with Hanjin Heavy Industries & Construction to delay the delivery of 10 containerships by about three months each, comprising five 6,500 TEU vessels and five 3,400 TEU vessels.”
2. “China Shipping Container Lines, the country’s second-largest box shipping line, plunged into the red in the first quarter following a 337% drop in net income as a result of the crash in the liner shipping market.
“Chairman Li Shaode said the company posted a net loss of $ 178 million in the first quarter.”
And also on the 29th, the Shipping Gazette provided these stories:
1. “Norwegian owners have cancelled 41 vessels so far this year, and further cancellations are under negotiation, according to Bergens Tidende. 30 of the cancelled vessels were ordered at foreign yards, while the other units were ordered at Norwegian yards.
“The global freight market is in a bad condition at the moment, which also affects Norwegian shipping companies, says Gunvor Aakvik at the Norwegian Shipowners’ Association.”
2. “Asian shipyards have lost more than USD 25 billion in lost revenues due to the wave of cancellations. Some 250 to 300 bulk carriers, LNG-tankers and container ships may have been cancelled at a global level so far this year, according to the UK newspaper the Times.
“According to Roy Thomson, a regional manager in Asia for Lloyds Register, the worst is yet to come — the cancellations will increase further, before the numbers go down. ‘We have not got to the root yet.’”
When he used the word “root”, Mr. Thomson was referring to the bottoming out of the economic downturn. He should have been looking into the “root” cause of the crisis. Along with others in the maritime industry, he sees only the devastation underfoot. A week ago we were told that the number of lay-ups had decreased – that carriers were now putting vessels back in service. That wasn’t the truth, and official figures last week showed that the actual number had increased. The number of idled vessels is now admitted to be 506.
While shipping and international trading interests are watching billions of dollars go down the drain, much is being written about Wall Street’s problems and about banking failures – as though these were root causes rather than effects. The bursting of the housing bubble and consequent real estate foreclosures also share some of the blame, according to the experts. No one in these different fields of commercial expertise has been able to devise a way of stopping the world’s disastrous free fall, yet the conventional wisdom coming from the elite is that this worldwide slump is not as bad as the “Great Depression”. Consumer confidence is rising, they’re quick to say. Tentative signs of recovery are now being seen, they say.
“Consumer confidence” and “tentative signs of recovery”? Not according to what Reuters is reporting:
“ISTANBUL (Reuters) – May Day protesters clashed with police in Germany, Turkey and Greece on Friday while thousands angry at the government’s responses to the global financial crisis took to the streets in France and Spain.
“Rising unemployment across Europe and beyond has added intensity to May Day marches as last year’s market crash and banking meltdown rolls into the real economy …
“Turkish riot police fired water cannon and tear gas, firing shots and pepper spray to disperse masked protesters. Young men hurled stones and Molotov cocktails, smashing bank and shop windows in side streets ..
“Almost one in three young people in Turkey is without a job and the government fears social unrest and increased ethnic tension because of the downturn. Labor unions, traditionally weak, have become increasingly vocal …
“In Berlin and Hamburg, scattered violence erupted in the early hours of the May Day holiday injuring more than 50 riot police, authorities said. Some 200 demonstrators chanting anti-capitalist slogans threw bottles and stones at riot police in Berlin, police said, torching five cars. Police also clashed with the leftists ahead of a far right rally …
“French unions organized nearly 300 marches targeting President Nicolas Sarkozy’s social policies and crisis management … calling on members to join the protests for the first time since 2002 …
“But in a sign of how far disillusion has spread, even staff in management positions joined the marches. The number of jobseekers under age 25 increased 36 percent year-on-year in March …
“Greek police said they fired tear gas in a clash with 300 people at Athens Polytechnic. Elsewhere in Athens, nearly 6,000 protesters, mostly members of a communist trade union, gathered under the watchful eyes of 4,000 police. Many were angry at bank bailouts. ‘We won’t pay for their crisis,’ read banners from the country’s main trade union.”
Getting back to Bob Herbert’s article, here’s the phrasing Bob should have used. The substitution of just one word would have shown the cause-and-effect relationship that is escaping everyone’s attention. Bob would have been entirely accurate if he had written:
“But we can’t seem to get credit flowing in any normal way again; we can’t stanch the terrible flow of home foreclosures; because !! (instead of “and”) we’re not doing nearly enough to address the most critical need of all: putting people back to work.”
But how could we ever manufacture anything in this country that overseas workers couldn’t duplicate at a much lower cost? Any attempt would put us back at square one.
Not so. Employed Americans become spending Americans, and when spending Americans become demanding Americans – who become consuming Americans – overseas factories will hum again. But what can employed Americans produce without foreign competition? Our patented containerships … as we’ve been saying all along. Under a government-mandated Emergency Shipbuilding Program … like the one that ended the “Great Depression” (see Vol. XIX, Art. 10) … 50 million Americans would be employed to build the vessels needed to revive the world’s economy. [And if that doesn’t happen soon, we’ll be smelling pepper spray and tear gas on Main Street, USA.]