Unless you have been living under a rock for the last two weeks, you probably are well aware by now of the rocketing gas prices across the US as a result of the Russian aggression on Ukraine. This concerning situation…
How did we end up running short on everything?
COVID-19 related shortages, from chips to timber, have now become perhaps the second most lasting experience of the past 2 years beyond the pandemic lockdowns. This hard-learned lesson in economic disruption is still puzzling the world over, and is probably here to stay. So it is only natural to question how did we end up running short on everything and what is the way out of it?
The great supply chain disruption, as it has been labeled by the mainstream media, has become the central element of the prevailing uncertainty framing our economic prospects worldwide. The ever-present shortages have fuelled an unprecedented increase of prices on virtually all commodities, something so uncommon for the developed world. As central banks debate about the acceptable levels of this inflation, and most crucially about its temporary or permanent character, shortages and rising costs continue to throttle businesses large and small. Consumers meanwhile are confronted with an experience very rare in modern times no stocks and no indication on when these would return.
The truth is shipping and logistics are at the center of the explanation of how we ended up here. A series of lockdown induced shutdowns of manufacturing especially across Asia, and later of shipping ports, accompanied by an exacerbated and panic-induced increase of demand for Chinese-made factory goods, meant that millions of shipping containers — the driving means of the global trade – became unavailable and in very short supply, as these were being used for other vital deliveries of items such as personal protective equipment. This has in turn caused the price of maritime shipping from Asia to multiply tenfold since the beginning of the pandemic, given the extra piled up demand, thus rerouting and disrupting traditional supply chains.
Although the trucking industry professionals continue to diligently and selflessly keep our great nation’s economy humming, in spite of the associated personal health risks, it simply doesn’t depend on us alone. The globalized trade and manufacturing specializations cannot shift seamlessly, as decades of supply chains became undone or overwhelmed by increased demand. The inflationary pressure associated with quantitative easing: in essence pandemic induced asset purchase programs, and stimulus checks, have not helped either, driving in fact the price increase of all goods, be it temporarily or for the long term.
Trade experts suggest that the supply shortages are also being exacerbated by rational reactions to recent events, or the animal spirits as Keynes would put it. As humanity continues to order more and earlier than previously needed, it isn’t lessening the pressure on factories, warehouses, ships, and trucks.
This vicious cycle of the natural human instincts responding to the problem, accompanied by the inflation-related uncertainty, makes the current disruption unlikely to resolve itself soon enough, and questions the road to economic recovery in the future.”