OK, This I Don’t Like

In Evidence that we should freak out, episode I, RC3 points me to Grain piling up in Canadian ports | FP Passport:

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.

Krugman is right (again): if the IMF crowd can't pull something fierce-looking out of the hat this weekend, next week is going to be a real shocker.

(But I find Evidence that we should freak out, episode II much less convincing. That sounds more like an investment opportunity than a looming disaster.)

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2 Responses to OK, This I Don’t Like

  1. Rafe says:

    It seems like the market is chock full of good opportunities to invest. Nobody seems to be taking those opportunities. Lending money short term to stable companies is pretty safe — that’s why the interest rates are so low. But nobody’s doing it? I don’t know if it’s because lenders can’t afford to extend any more credit (no matter how low risk) or whether they really just don’t trust anyone to pay it back any more.

  2. wcw says:

    This is a great time to go long risk in various ways, if the system doesn’t collapse. If it does, grain piling up will be the least of your worries. Watching IBM nearly unable to float paper should scare you just as much as watching Canadian grain sitting in silos. Both are prima facie signs that collapse is a very real possibility. Systemic collapse tends to invite widespread misery. This collapse would be worldwide. Worry.

    As for corporate bonds, you’re just wrong. One, nobody can float paper: see http://www.bloomberg.com/apps/news?pid=20602012&sid=aOgEp9P_C5TA&refer=corporate_bonds Two, spreads over Treasuries are not low but high. Still, even if spreads weren’t high, you should be worried. A functioning banking sector is important: http://www.ft.com/cms/s/0/3c29a40a-9617-11dd-9dce-000077b07658.html

    Even the Wobblies didn’t want society to collapse, but to build a new society in the shell of the old. If you want capitalism as we know it to collapse amid worldwide misery, fine, but at least be open about it.

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