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Containers crammed with electronics, clothing and other potential Christmas presents are stranded at sea by the bankruptcy of one of the world’s largest shipping lines. Theres more to come. (Phot by NASA)
It’s hard to describe globalization to a mayfly in a manner that will hold his interest. It takes a gifted storyteller to interest a creature with a 24-hour lifespan in anything that’s out of sight, or takes longer than a couple of hours to play out. In this he is much like the modern American, who has little appetite for any story that takes more than 140 characters to tell, about an event that takes more than a few hours to unfold. (As to why the American consumer of news acts and thinks more like a mayfly (Ephemeroptera) than a homo sapiens, well, that’s another question, for another time.)
But the fact is that homo sapiens ephemera simply cannot grasp the fact that a long, slow-burning fuse, however boring it is to watch, almost always leads to a terrible explosion. By that time, ephemera has forgotten the fuse and is always surprised. (“Wow, no one could have seen that coming,” he says.)
So it is with globalized trade, the system set up to allow increasingly impoverished people to borrow money on their credit cards to buy cheap crap — made in China by totally impoverished and sometimes enslaved people — at their local MartMart store. The brilliance of the system is that while the people who make the crap and the people who consume it remain impoverished, the corporations that manufacture, finance, transport, market and insure the crap get filthy rich. (Stay with me, homo sapiens ephemera, something’s going to happen in the next graph, I swear.)
Teensy flaw in the operating theory: once the lower (formerly known as middle) class has spent all its money and maxed out all of its credit and lost all of its jobs to the truly impoverished in the Third World because they work for so much less, there’s nothing left with which to buy cheap crap. Consequently — make that inevitably — global trade has been slowing steadily since 2010, which you may remember was Year Two of the Great Recovery from the Great Recession. (I know, Ephemera, I lied about something happening in this graph, the next one, I promise. Stay with me! Where’s a good clickbait writer when you need one? “Financial genius reveals shocking truth about global bikini trade! You won’t believe your eyes!!!”)
Okay, now that I’ve got you for a few more seconds, here’s what’s happened. After years of telling you about the burning fuse [Global Recession Accelerating toward Depression last October, World Trade is Coming to a Halt [UPDATED] in January and They’re Parking the Trains. And the Ships and Planes and Trucks… in May, to name a few] something has finally blown up. Not the whole enchilada yet, but a big chunk of it. The seventh largest container-ship operator in the world is insolvent.
Who gives a farthing? You do, that’s who, because as a result YOUR KIDS MAY NOT GET THIS YEAR’S MUST-HAVE, EVERYBODY-ELSE-HAS-ONE XMAS TOYS! Talk about Apocalypse Now.
89 monster container ships owned by Hanjin Shipping Company, South Korea’s largest shipping line, were at sea when the company asked for bankruptcy protection from South Korean courts. Immediately, ports worldwide began refusing them permission to dock for fear they would be unable to collect docking fees. If they did dock, they would be unable to unload without paying upfront the costs of unloading. If they did unload the cargo would not be moved from the terminal unless shippers were paid in advance. And of course refueling the vessels would require cash in advance.
Fourteen billion dollars worth of cargo, much of it Christmas merchandise that must be unloaded so to make the peak shopping season that begins the day after Thanksgiving, is stranded on ships that need over half a billion dollars in cash to cover current expenses. The company has raised $90 million, and has asked the South Korean government for an emergency loan of $90 million, but prospects for avoiding liquidation are bleak. The company needs another $1.2 billion almost immediately to roll over maturing debt, and having incurred staggering losses for four of the last five years, may not be able to do it.
Hanjin is hardly alone. The world’s shipping industry has been losing serious money since last year, and is on track to lose $5 billion this year. Industry analysts attribute the losses to an oversupply of ships, but another way to put that is to blame it on an undersupply of cargo.
Although four Hanjin ships have been granted protection by US courts and have raised the money to unload their cargoes in the U.S., havoc continues to spread through global commerce where Hanjin is being seen as merely the first card to fall.
I know. It took too long to explain. Tune in tomorrow, homo sapiens ephemera, for the 140-character version.
I really enjoy reading your posts. Keep up the good work!
I could not agree more Tom, I have followed the previous articles and points you raise with interest but the Hanjin collapse came as no surprise on one level. You have to admit that if the Koreans using every globalised dodge available (note the port of registry on the stern of the ship and you can be sure they are not Korean crews either, probably Bangladeshi’s or Philippino’s as to maintenance and safety, hey it floats and moves does it not!) to avoid paying any taxes etc cannot make money, then you know there is no money to be made! That I think is the point of the story. I get it but I am sure we will get the usual delusional obfuscation about captitalist re-engineering, re-energising, refocusing, excess capacity etc etc etc etc. The focus on the knock on effects is fabulous but thanks for the focus on what caused the knock down.
Yes I know it is not a Hanjin ship illustrated but the Taiwanese mob, same story different country thats all. Great photo.
Interesting addition of the vocal recording. Nice touch. And, of course, your analysis is top notch.
John it has been there for years, top left under the headline, labelled “podcast”. I used a different player for a while because I was having trouble with the usual one. Glad you like it, and now continue to listen by clicking on “play in new window.”
I guess I’ve proved myself not to be very observant! I’ll continue to give it a listen.
Tom,
My thanks as well! Your insight and humor make these topics much more palatable, you and Greer are my favorite writers. Please continue doing what you do so well.
Container Shipping Collapsing. Stop.
Santa short of Toys to deliver on Christmas. Stop.
Oil Tanker Shipping also Collapsing. Stop.
Reindeer short on fuel for delivery of Christmas toys. Stop.
The bulb in Rudolph’s nose is too dim for safe flying. Stop.
Skittle Shitting Unicorns will take over for Santa. Stop.
Under 140 words. :)
RE
Still seems long…..
OK, I’ll boil it down to 2 words.
Clusterfuck imminent.
RE
Good one Mr. Lewis. I too enjoyed the voice version and hope you keep doing them!
“four Hanjin ships have been granted protection by US courts and have raised the money to unload their cargoes in the U.S.” Did Hanjin raise the money to pay the US docking and unloading fees or are US citizens covering this tab for this Korean corporation? Is the US protecting Hanjin from US creditors?
Another sign that the end is near, Walmart has abandoned plans to construct a new store in my area (suburban Washington DC). The local government found every loophole and bent every rule to get this thing to go through and Walmart just walked away.
The US courts, as I understand it, simply granted the ships the protection of US bankruptcy laws so they cannot be seized by creditors while deals are worked out (the Korean bankruptcy protection has no effect here). Hanjin has to come up with the money for docking, unloading, etc., there is no US exposure.
WalMart is also closing stores by the hundreds. So what is worse than a town whose small businesses have been decimated by the opening of a WalMart? The same town after the WalMart has closed.
[“But the fact is that homo sapiens ephemera simply cannot grasp the fact that a long, slow-burning fuse, however boring it is to watch, almost always leads to a terrible explosion. By that time, ephemera has forgotten the fuse and is always surprised. (“Wow, no one could have seen that coming,” he says.)”]
Great analogy, …and by that, I mean that I will steal it for my own use from time to time… ;-)
Late to the dance due to:
1. Entire Verizon (cheap, plastic, substandard) communication panel failure (this will be the 2nd replacement). Therefore no landline, tv or internet.
2. The near impossibility of reaching a human being over the phone at Verizon customer service. When you finally do reach someone, they have a suspiciously Indian accent and, unbelievably for a telecom, the line is full of static and the accented voice is garbled beyond recognition.
3. The contract that locks one in
for longer than their gear lasts (apparently) requires prompt payment for this shoddy service and allows no deductions for lack of said service from equipment malfunction.
I’m sure they have a container full of these panels on one of those ships that can’t offload.
Thanks for another great essay, Mr. Lewis. In a similar fashion our economy will come undone in due time. Good thing HanJin isn’t backed by Wells Fargo!
And now for something completely different…
I will confess to a virulent hatred of “globalism”. I personally find ZERO redeeming features in this way of “thought”,
if one can stoop so low as to attribute thought to the hysterical rejection of reality that is the globalist perspective.
Near as I can tell, globalism is a bastardization of several failed schools of thought, not one of which left its mark due to any genuine contribution to the state of humanity.
Considering this, it is hardly surprising that the edifice of globalization is in the process of failing spectacularly, from its demented enforced self hatred to its perverse ideology, it really is some form of pathological entrainment, and as such, cannot be sustained.
Shipping is central to the globalist aim to shift capital to Asia, and it’s failure is central to the failure of the entire globalist fantasy.
Ultimately, the globalist experiment is a plaything of a class of degenerate parasites that must be held accountable for all the destruction, pain, and sickness they have visited upon people and planet.
http://money.cnn.com/2016/09/13/news/hanjin-british-artist-rebecca-moss-stranded-container-ship/
This is just the tip of the iceberg.The reality is that the 90000 container vessels are rapidly using up the limited suppy of fuel oil (obtained from crude oil) so their demise in coming years is certain. Globalized trade will go down into the black hole and millions of both workers and consumers around the globe will be absolutely bewildered by the monetary response.
This has also been given publicity here in Australia.
http://www.abc.net.au/news/2016-09-15/explainer-why-hanjin-ships-are-stranded-around-the-globe/7847626