Sunday, November 16, 2008

Shipping and Letter of Credit - Riots??

Money - Photo by K.C.

From Naked Capitalism "Yet More Trade Finance Worries"
"the dramatic fall in shipments of basic materials, as reflected in the collapse of the Baltic Dry Index. This in turn, as we have also stressed, is in large measure to the difficulty of obtaining trade finance, in particular letters of credit.

That article links to an article in London Banker this article Systemic Risk, Contagion and Trade Finance - Back to the Bad Old Days that without Letters of Credit

According to the London Banker article the lack of letters of credit could lead to:
"If there are no foods in the shops, people go hungry. If people go hungry their children go hungry. When children go hungry, people riot and governments fall."

I'm a mariner and don't have any expertise beyond that field but I do recognize starving children, riots and falling governments would be a problem. The London Banker article may be overstating the case but still I wonder why this problem with letters of credit is not getting more attention.

For want of a nail a kingdom was lost.


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