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Post"Ever Given" and its Precursor: "Prinz Valdemar," 1926 (from Michael Frank) (John Eipper, USA, 03/28/21 9:20 am)
Michael Frank writes:
Blockage of the Suez Canal is delaying $9.6 billion per day of shipping, according to Bloomberg. But delay is only a down payment on the ultimate cost of the wreck. If your Toyota isn't delivered for a few weeks, that's not a costly disaster. But factories and refineries can't be turned on and off at will. They rely on a predictable inflow of raw materials and a predictable lift schedule for finished products. Shutting down and restarting something like a refinery, if that becomes necessary, is an expensive, disruptive process.
This situation is not unprecedented. In 1926, Prinz Valdemar was an antiquated clipper ship which had spent three decades in trans-Atlantic and trans-Pacific trade. The superannuated vessel had been sold to interests in Florida, there to be reborn as a floating hotel. It was in Miami harbor, loaded with construction materials, when it ran aground in the ship channel. It's possible that unusual currents had shifted the sand bar, or perhaps the pilot made an error. The bow caught, the stern swung around, and a breeze caught the top-heavy rigging. The ship capsized, blocking the channel. It was stuck at a strategic choke point. A dredge attempted to widen the channel, to allow shipping to pass the wreck. But when a ship tried to round Prinz Valdemar, it also became stuck. This made it impossible for shipping to enter or leave the port of Miami. It took many weeks to refloat the wreck and restore the channel.
1926 happened to be the peak of the Florida land bubble. Throughout Florida, land speculation and construction projects were supercharged by dreamer's capital. Miami became a popular tourist stop, and the tourists came with money to invest. Land rapidly changed hands in a chase for choice properties and real estate wealth. Speculators bought "water land"...underwater areas that might become shoreline as landfill operations progressed. The population of Florida grew rapidly, and the number of Florida absentee landowners grew still faster. There was no highway system as we know it today, and the railroads soon embargoed construction supplies because their rails, rolling stock and warehouses had become overwhelmed by heavy traffic. Maritime shipping buttressed the construction industry and the speculative mania.
With Prinz Valdemar blocking the ship channel, shipments in and out of Miami became impossible. Tourist ships had to anchor offshore and ferry passengers to and from the beach on small craft. Reserves of construction materials were quickly consumed, with no means of resupply. The citrus crop rotted on the piers. Tourist traffic dried up, and there was less cash being tossed around. Visitors stranded on endless vacations clamored for transportation home. The harbor was blocked for six weeks. And then, just when business began to pick up, a powerful hurricane devastated the city as summer ended. It didn't take long for the bubble to pop. Projects slowed down, stopped, and were abandoned. Land prices collapsed.
Recessions don't begin in the financial markets, they begin in the real economy. The end of the Florida boom took the pop out of US real estate. Fortunes were lost. Not only was the southeast confronting a new reality, the poison of falling real estate values began to seep north and west. In the Midwest, farmers and industrialists had grown fat feeding, rebuilding and resupplying Europe earlier in the decade. With global production increasing, prices for their products were already falling. Now land values began to slide. The blockage of the Miami ship channel may well have been the "black swan" event which presaged the market crash and depression (or maybe not).
What will be the result of the Ever Given grounding? As Mark Twain said (when not misquoted), "History never repeats itself, but the Kaleidoscopic combinations of the pictured present often seem to be constructed out of the broken fragments of antique legends."
JE comments: Michael, you've shared the forgotten story of a massive "cascade" of economic devastation. Could the Valdemar wreck have been the opening act of the Great Depression? This sets a scary precedent for the Ever Given and its aftermath.
As for the Ever Given, is it still stuck? A purpose-built website gives you the update. Answer: Yes, it's still stuck, although a flotilla of tugboats has now shifted it 30 degrees.