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Looks like supply chain issues will come back after New Year since CoVid is taking hold in Chine pretty strongly
Headline says China is registering 1 Million CoVid cases a day and 5K deaths—
And what is registered is likely not the real total—
So things getting worse in China…
Supply chains of the 20-30 years up to 2020 are not going to be fully restored over the next year or the next five years, or even the next 10-30 years, COViD is just one reason for that, and in time may prove to a superficial one.
Either way, Fed officials seem to know that and, despite openly messaging a goal of a return to a ~2% inflation rate, they are also subtly signaling that a higher inflation rate will be the new norm, say ~3% when things are going well and higher when they are not.
Looks like supply chain issues will come back after New Year since CoVid is taking hold in Chine pretty strongly
Headline says China is registering 1 Million CoVid cases a day and 5K deaths—
And what is registered is likely not the real total—
So things getting worse in China…
China is the last country trying regulate & authority themselves to safety from an aerosolized virus. Then they stupidly rejected the vaccines that actually worked in favor of their own vaccines that are no better than saline solution. There's no way to hide from this. Lockdowns were always about buying time and managing resources in anticipation of a vaccine. Lockdowns could never stop the virus. If it passed via surface or droplets maybe. But aerosolized? We're screwed.
They have to let whatever attrition is going to happen, happen.
Supply chains of the 20-30 years up to 2020 are not going to be fully restored over the next year or the next five years, or even the next 10-30 years, COViD is just one reason for that, and in time may prove to a superficial one.
Either way, Fed officials seem to know that and, despite openly messaging a goal of a return to a ~2% inflation rate, they are also subtly signaling that a higher inflation rate will be the new norm, say ~3% when things are going well and higher when they are not.
I mean we have historical precedent. They could raise the Funds rate above the rate of inflation. So 7.5-8%. That WOULD force inflation down. It did before.
Otherwise we're going to get into a wage price spiral. I'd argue it's already happenning. We've seen more strikes in the past year than in the 30 years prior. The recent railroad strike was very instructive - they had to give the workers 20% raises and a one-time 10k bonus. This is going to happen in sector after sector.
Supply chains of the 20-30 years up to 2020 are not going to be fully restored over the next year or the next five years, or even the next 10-30 years, COViD is just one reason for that, and in time may prove to a superficial one.
Either way, Fed officials seem to know that and, despite openly messaging a goal of a return to a ~2% inflation rate, they are also subtly signaling that a higher inflation rate will be the new norm, say ~3% when things are going well and higher when they are not.
Which officials specifically have signaled as much?
Gas prices have fallen back below $3.00/gal here in SW FLA, but grocery prices are still very high. I don't think they are still climbing, but they have not fallen either.
Everything else costs more too. I bought bags of mulch this time last year for $3/bag, & they are now $4/bag, & they never go on sale anymore.
I don't drive much, (work from home) so the falling gas prices don't help me.
Has less to do with Congress than with giant corporate interests.
The push for offshoring came as a result to reduce labor costs and seek out market efficiencies when producing goods. Labor in the US is expensive, labor in places like China, India, and Mexico are much cheaper.
Great, for when times are good! Not so great for when times aren't running optimally. The bungled global supply chain has resulted in bottlenecks across the board. Large swaths of Chinese regions are still locked down due to COVID, which incidentally happen to be where a lot of manufacturing is done. Energy prices are also relatively high because of the war in Ukraine and sanctions on Russia.
Don't hate the player, hate the game.
China not only utilized their giant potential market as a lure, but they effectively blocked imports. Further they made base inputs (i.e. steel) at a loss to further incentivize business to move to China. Given MFN status from the 90's on big business really had no choice....move to China and pickup a new market or stand fast and get thrashed while the Congress Critters remain blissfully unaware of the massive damage being done as entire supply chains were being pulled out of the US. Those that didn't move were obliterated.
There was a useful byproduct, however. It kept inflation very low even as deficits got larger and larger because things were now made by people making $5 a day.
China (and several other countries) played a successful long game while the US ran a circus based upon foreign wars, abusing interns and making money not scarce and for all kinds of purposes. The populace divided on stupid issues and the country fragmented.
The government (Fed) data is always months behind. We all knew inflation was out of control a year before they ever raised interest rates the first time. They were a year late. Of course, our government caused all of this to begin with by shutting everything down for Covid and now here we are. Now they will continue to raise rates until their data shows inflation is under control but by that time all of us will have already known they have caused a recession for at least 6 months.
Inflation has gone from "Jaw droppingly shocking" to just "Pretty damn shocking"
but it's still a shocker!
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