Typhoons and bubbles

Naysayers will insist that the intensity of typhoon Hainan, like the mini-collapse of the economic world order today, is a black swan event- unprecedented, unusual, random and unexpected. Do not believe them. Both these disasters are man-made and both should have been expected. Alas, both types of events will become more commonplace and less unprecedented with each passing year, because mankind will do little to deviate from its self-annihilatory course. 

Even politicians like David Cameron have begun to acknowledge that climate change ‘could’ be the cause of Hainan. The Philippine government has already blamed that for the severity of the typhoon; Yeb Sano, the head of its delegation at the climate change talks in Warsaw, made an impassioned and tearful speech, calling for an end to what he called ‘madness’ and others said was the cost of human inaction. That is actually inaccurate, because we are where we are because of positive prehensile action, not inaction; we are not some dawdlers sitting under a tree waiting for the apple to fall. Mr Sano got a standing ovation in Poland at the end of his speech, but he is not likely to get much else out of the summit.

Hainan has been billed as one of the biggest storms ever to make landfall. The staggering devastation it has caused, and the thousands it has killed, seems to have put the climate change deniers on the back-foot for the time being. Scientists are being allowed to say, without contradiction for now, that climate change warms oceans and so feeds more energy to tropical revolving storms - typhoons, hurricanes and cyclones. Rising sea levels- another climate change fallout- makes the resultant storm surge even more powerful.  Climate change may not increase the frequency of these storms, but it certainly makes them much more powerful simply because the oceans are warmer today. 

Sailors have been feeling for years, without much empirical data to back them up, that storms at sea were becoming stronger, the waves higher and the risk bigger. Their instinct is probably as accurate as the projections and predictions put out by the army of experts out there with their axes to grind. Shipping should start re-examining its premises and its risk analyses right now; actuaries across insurance should throw away some of their old models and program in new ones, for there is a gaggle of swans on the horizon, and they are all black. 

The other threat that consumes shipping- and the rest of the world- is, of course, the global economy. The green shoots of revival that analysts strained to find a year or so ago - many optimistically declaring that the latter half of 2013 would see a turnaround in shipping- have withered and died. Some smallish segment of the industry celebrates sporadically, as chemical tanker owners seem to be doing today, but that is about it. 

I don’t get how the collapsing and self-destructive crony capitalist, bail-out-the-crooks system can continue to work indefinitely. Governments still think that printing more and more money will solve the problem that printing money caused in the first place. (This seems crazy, except if one holds the view that governments are made of people whose prime driving force is the perpetuation of corruption and greed. Then it all makes sense.) 

There are frightening parallels here with mankind’s reaction to the climate change issue- denial, greed and a hope that some messiah will perform some eleventh-hour miracle and save our souls. I am afraid that is not going to happen.

So the US, adding more than two and a half billion dollars to its debt daily, leads the rest of the world following the so called economic stimulus route, adding more and more powder to the keg that waits for the next spark to explode. Almost all nations are printing money hand over fist-some, like Japan, faster than others. This money is sloshing around, creating new stock market, commodity, real-estate and other bubbles and distorting markets across the world. Obviously, all this means there will be another economic crash sooner or later- nobody knows exactly when. I do know that the next fireball will be worse than the last one, because the bubbles are bigger. The giant Ponzi scheme that is the global economic order is turgid with inflammable gas.

I cannot see how shipping- with its big ticket investment costs- can thrive in this atmosphere. Like the global economy, shipping needs trade to thrive, which is why the Baltic Dry Index was considered a proxy for the world’s economy until not so long ago. But growth across the world is tepid today at best, and likely to remain so for a while.  Even China, that much hoped for saviour, has some pretty big problems of its own; it is slowing as it changes from an investment driven economy to a hopefully consumerist one. 

To top it all, shipping still has major overcapacity issues. 

There is another frightening reason that I am not optimistic and that is this: I think that the next two or three decades will see unprecedented social upheavals because of the clearly unsustainable economic and ecological paths we are on today. Some societies are going to be rent asunder as anarchy erupts because of a combination of factors-anger at corrupt governments and their fat cat coteries and despair at rising disparities will top that list. The fight for shrinking natural resources will be another major trigger. It is tough to see trade- or shipping- thriving in this scenario, because some of the societies these upheavals will take place will be either the biggest economies or the most populated societies on earth. 

Shipping’s experts may well believe today, as everybody else seems to, that any global economic or ecological collapse is far into the future. They may well hope that the mayhem associated with that black swan event will not happen on their watch- or in their lifetimes. I hope they are right and that their arrogance is justified. But even if they are and it is, there is little to cheer about. Quite apart from the question of the future of our children is the near certainty that - thanks to our debauched economics - the crash-boom cycles in trade are set to grow shorter and shorter as bubbles expand and explode, and expand and explode again.  

The nature of the beast means that shipping will always get hit first by each detonation. And harder, each time. 

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