A Real Example Of Price Imbalance

It’s not just the trade data from individual countries. Take the WTO’s estimates which are derived from exports and imports going into or out of nearly all of them. These figures show that for all that recovery glory being printed up out of Uncle Sam’s checkbook, the American West Coast might be the only place where we can find anything resembling Warren Buffett’s red-hot claim.

That’s a problem and a much bigger one that may otherwise appear especially given current prices.

In terms of estimated trade volume, the actual tonnage of goods being transited across oceans, destination one of the world’s vast port complexes, the latest numbers seem quite good; if only in the same way as all recent statistics have. Base effects showing up when comparing to the previous year tell us little or nothing about how everything is truly getting along, except that it must not be nearly as bad as the worst global trade setback since the Great Depression.

Even then, the total world trade volume in Q1 2021 was only 5.9% more than during Q1 2020. And if current estimates are anywhere close, the annual change in Q2 will have been around +21%. 

However, either of those are barely better than volumes put to sea (land and air) years ago. For all the fuss about America’s Pacific ports, that only deepens the deception. At its purportedly inflation apex during the first three months of this year, the WTO thinks global volumes were just 1.7% more than they had been during Q1 2019 – which was already a whole year into a worldwide slump (wrongly attributed to hurt feelings allegedly produced by “trade wars”).

Compared to Q4 2017, when in economic (small “e”) reality the eurodollar began to turn the overhyped globally synchronized growth into the unappreciated globally synchronized downturn, the world’s worst since 2008 before 2020, volumes aren’t even 4% more. That was more than three years ago.

And yet, you hear how container prices have skyrocketed which, like some particular vessel rates, makes it seem like there is and has been a truly robust rebound in worldwide demand and trade.

Instead, as John Dizard of the Financial Times found out – after actually calling around and asking questions like a true reporter – nobody in or out of the industry is thinking too much ahead. On the contrary, the American federal government has created a bubble of sorts, a massive distortion unbecoming the underlying facts more broadly.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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