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The Baltic Dry Index has been falling for the past three months, and has been in free fall for the last month. I had originally interpreted that as slackening world demand, particularly by China,  indicating a worldwide economic slowdown.

Now a report from Naked Capitalism suggests that shipping volumes have seized up because of the financial crisis:

I spoke to another friend of mine this afternoon, whose father has been in the shipping business forever. Pristine credit rating, rock solid balance sheet.

He says if he takes his BNP Paribas (OTCQX:BNPQY) letter of credit to Citi (NYSE:C) today for short term funding for his vessels, they won't give it to him. That means he can't ship goods, which means that within the next 2 weeks, physical shortages of commodities begin to show up.


Readjust growth expectations?

If this condition of inability to ship because of problems within the inter-bank credit market is widespread, then we have a case of analysts getting fooled by the data. The steps taken by the authorities to ease these conditions could then spark an enormous rally in the markets, in equities and especially in commodities.

Source: Are Analysts Being Fooled By The Data?