A ‘canary down the coal mine’ that predicted the 2008 crisis is signalling another crash
Will Martin
BusinessInsider.com
Jan. 20, 2015
A measure of international trade often seen as a bellwether for the global economy has crashed to its lowest level ever, fueling fears we could be heading for another 2008-style crash.
Back in November, the Baltic Dry Index dropped below 500 for the first time in recorded history, and it has kept falling ever since. On Wednesday morning it fell to a low of 369.
To put that into perspective, the index was as high as 1,222 in August, and it has fallen 84% from a recent peak of 2,330 in late 2013.
The Baltic Dry Index measures how much it costs to ship “dry” commodities around the world — raw materials like grain and steel.
The index is frequently used as a “canary in the mine” for the state of the global economy and how well international trade is performing. If the price is low, it suggests trade is slowing. This graph from Capital Economics shows just how closely the index tracks world trade volumes.
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