Merchant navy: in dry dock?

One under-reported effect of the refusal by banks to trust each other is the inability of international shippers to get letters of credit. It's akin to the old-fashioned way that merchants used to operate, as Yves Smith of naked capitalism explains:

For those new to this topic, international trade depends to a large degree on letters of credit. While they can help finance shipments, an even more fundamental role is that they assure the shipper that he will be paid for the cargo sent. Without banks using letters of credit as the means to send payment to exporters, parties that are new to each other or conduct business with each other infrequently could never trade with each other. [1]

In other words, the collapse of the Baltic Dry, the standard index for measuring international shipping trade, is a direct effect of the credit crunch and not purely demand-driven. Given that no country (except possibly North Korea, which is hardly a beacon of pretty much anything these days) is entirely self-sufficient in all that it consumes, a collapse in world trade will not only affect consumption of vital necessities like food, but also manufacturing, which will affect jobs.

It's possible, of course, that credit will get moving again before these effects begin to show up seriously. Most countries and regions should have food stocks, and manufacturers can survive some time by giving their workers "hibernation orders", as one factory did recently. But if things carry on too long, then the effects will be serious, and it may perhaps be no exaggeration to say that what could be a simple recession could deepen into something worse.

[1] Source; see also, and also Alphaville.