What An Irony

A few days ago Ambrose Evans-Pritchard wrote an article about what he calls the Great Recession and how it is turning into a life sentence. He believes the crisis started on 12th August 2007 when yields on 3 month US Treasury Bills crashed from 3.76% to 2.55% in two hours. This was the moment that investors became so scared that they came out of the money market and flooded into 3 month US Treasuries and thus dramatically bringing down the yield. He also believes that it was the Asian 'Savings Glut' that caused the credit bubble crisis. You can read his fascinating article here. Evans-Pritchard has written another fascinating article today about how Germany's shipping industry faces a number of bankruptcies as a result of a contraction in the container trade. 100 German ship funds are already bankrupt with a further 800 in difficulties. Germany apparently controls 40% of the world container shipping market but like the oldest British shipping company which has just gone into liquidation misjudged the shipping business cycle and over invested in new ships for the Chinese market. Vessel rates have fallen dramatically leaving a legacy of debt and a glut of ships. However as more and more ships find themselves on the market at knock down prices as a result of foreclosure or in order for their owners to pay off debt the best ones are being bought by guess who? The Greeks. You could not ask for a more intriguing result. It brings a smile to one's lips at the realisation that here is a way out for the Greeks from their horrific financial predicament. They could even afford to buy the ships if they were to pay for them in drachma! If the Greeks bought the ships in drachma they could then afford to undercut vessel rates to such an extent they would be able to take a greater percentage of the shipping market from the Germans. You can read the article here.